PREPARED  UNDER  THE  DIRECTION  OP 

FREDERICK  A.  CLEVELAND,  PH.D. 


THE  SYSTEM  OF 

FINANCIAL  ADMINISTRATION 

OF  GREAT  BRITAIN 


A  REPORT 


BY 

WILLIAM  F.  WILLOUGHBY 

CONSTITUTIONAL  ADVISER  TO  THE  CHINESE  REPUBLIC;    PROFESSOR  OF  JURISPRUDENCE 
AND  POLITICS,  PRINCETON  UNIVERSITY 

WESTEL  W.  WILLOUGHBY 

PROFESSOR  OF  POLITICAL  SCIENCE,  JOHNS  HOPKINS  UNIVERSITY 

SAMUEL  McCUNE  LINDSAY 

PROFESSOR  OF  SOCIAL  LEGISLATION,  COLUMBIA  UNIVERSITY 


INTRODUCTION   BY 
A.  LAWRENCE   LOWELL 

PRESIDENT,  HARVARD  UNIVERSITY 


PUBLISHED   BY 

D.  APPLETON  AND    COMPANY 
NEW  YORK  LONDON 

FOR 

THE  INSTITUTE  FOR  GOVERNMENT  RESEARCH 

1917 


Copyright,  1917.  by 
THE  ^INSTITUTE  FOR  GOVERNMENT  RESEARCH 


Printed  in  the  United  States  of  America 


EDITOR'S  NOTE 

Ten  years  ago  a  definite  plan  was  formulated  for  the  preparation 
of  a  series  of  scientific  handbooks  through  which  exact  information 
might  be  made  available  to  citizens  and  public  officers  alike,  about 
the  methods  and  practices  developed  by  various  governmental  agen- 
cies in  the  conduct  of  public  business.  In  the  spring  of  1913,  this 
plan  was  laid  before  the  trustees  of  the  Rockefeller  Foundation.  In 
response  to  inquiry  as  to  what  studies  would  be  taken  up  first  if 
funds  were  provided,  the  following  were  suggested  as  of  command- 
ing importance:  (i)  Methods  of  budget-making  and  financial  con- 
trol; (2)  standards  and  practices  evolved  for  improvement  of  the 
civil  service;  (3)  provisions  for  pensions  and  retirement  allowances; 
and  (4)  methods  of  public  accounting. 

An  appropriation  was  made  for  the  purpose  of  prosecuting  these 
studies  and  placed  in  the  hands  of  a  special  committee  composed  of 
Messrs.  Jerome  D.  Greene,  Charles  D.  Norton,  Charles  P.  Neill,  Wil- 
liam F.  Willoughby  and  Raymond  B.  Fosdick. 

Under  these  auspices  three  men  of  nation-wide  reputation  were 
selected  by  the  director  in  charge,  each  holding  a  chair  of  govern- 
ment in  a  different  university  and  two  of  whom  had  had  consid- 
erable experience  in  governmental  administration,  to  make  an  initial 
visit  as  an  unofficial  commission  to  England,  France  and  Germany 
for  the  purpose  of  collecting  materials.  This  was  to  be  done  by  estab- 
lishing contact  with  officers  of  foreign  Governments  actively  engaged 
on  budget-making  and  civil  service  matters,  and  with  foreign  students 
familiar  with  these  subjects.  The  method  used  for  collecting  the 
data  was  first  to  prepare  an  outline  with  a  list  of  the  related  sub- 
jects concerning  which  concrete  data  were  to  be  obtained;  to  follow 
this  with  personal  interviews;  to  reduce  the  results  of  personal  in- 
terviews to  writing  and  submit  them  for  correction  and  amendment; 
also  to  collect  such  documents  and  data  on  the  ground  as  could  not 
be  readily  secured  in  libraries  or  through  correspondence. 

The  commission  began  its  work  in  England  early  in  July,  1914. 
Tentative  arrangements  were  also  made  to  spend  August  and  Sep- 
tember chiefly  in  Paris  and  Berlin,  with  possibly  some  supplementary 
inquiries  into  the  same  subjects  in  Belgium,  Holland  and  Switzerland. 


EDITOR'S  NOTE 

Every  facility  was  provided  for  personal  contact  through  letters  from 
government  officials  and  university  authorities  in  this  country,  and 
the  commission  received  very  cordial  cooperation  from  the  American 
Embassy  in  London,  through  which,  in  addition  to  its  recommenda- 
tions from  American  sources,  it  had  no  difficulty  in  getting  the  atten- 
tion of  the  responsible  public  officials  who  had  to  do  with  the  subject 
matters  of  the  commission's  inquiry. 

The  commission  worked  as  a  body,  although  a  tentative  arrange- 
ment for  division  of  labor  was  agreed  to  whereby  Mr.  William  F. 
Willoughby  was  to  give  special  attention  to  English  budget  materials 
and  English  documents,  Mr.  Westel  W.  Willoughby  to  budget  and 
civil  service  practices  in  France  and  Mr.  Samuel  McCune  Lindsay 
to  civil  service  in  England  and  to  budget  materials  and  civil  service 
in  Germany.  The  commission  collectively,  however,  interviewed 
most  of  the  officials  and  persons  with  whom  matters  were  first  taken 
up  in  detail  in  England,  and  the  field  notes  of  these  interviews  were 
discussed  by  the  members  of  the  commission  as  a  body — the  thought 
being  that  this  would  help  to  standardize  individual  inquiries  later 
after  the  members  had  separated. 

The  outbreak  of  the  war  in  the  beginning  of  August  interrupted 
these  plans.  Mr.  Westel  W.  Willoughby  had  made  appreciable 
progress  in  Paris,  and  Mr.  William  F.  Willoughby  and  Mr.  Samuel 
McCune  Lindsay  had  gone  as  far  as  Holland  when  hostilities  began. 
Under  the  circumstances  the  only  thing  to  be  done  was  for  the  mem- 
bers to  reassemble  in  England,  complete  the  collection  of  data  which 
had  been  undertaken  there  relating  to  the  English  system,  and  then 
return  to  America. 

While  the  war  made  it  impossible  to  carry  out  on  broad  lines  the 
original  plan  and  rendered  more  or  less  inoperative  the  tentative  di- 
vision of  labor  between  the  members  of  the  commission,  the  com- 
mission did  succeed  in  getting  full  data  regarding  the  system  of 
financial  administration  of  Great  Britain  and  much  valuable  material 
relating  to  France,  Germany,  Belgium,  Holland  and  Switzerland, 
which  latter  material  may  be  used  in  future  studies  of  continental 
budget  procedure  and  of  civil  service  and  pension  practice. 

The  results  of  the  study  of  the  British  system  of  financial  adminis- 
tration are  presented  in  the  present  report.  The  first  draft  of  this 
report  was  prepared  by  Mr.  William  F.  Willoughby.  This  was  com- 
pleted by  him  during  his  absence  in  Peking  as  constitutional  adviser 
to  the  Chinese  Government,  a  general  conference  having  been  held 
with  the  other  two  members  of  the  commission  before  he  started,  and 
substantial  agreement  having  been  reached  as  to  the  general  charac- 

vi 


EDITOR'S  NOTE 

ter  of  the  presentation,  and  as  to  the  conclusions  to  be  drawn.  Later 
this  draft  was  carefully  gone  over  by  both  the  other  members  of  the 
commission,  and  after  minor  revisions  was  signed  by  all  three  mem- 
bers of  the  commission. 

This  report  finds  its  chief  value  in  this:  That  it  sets  forth  briefly 
and  clearly  the  impressions  of  three  men,  well  trained  and  of  excep- 
tional experience,  as  to  the  scope  and  practical  workings  of  the  Eng- 
lish budget  system;  and  more  especially  that  it  sets  forth  those  par- 
ticulars which  will  facilitate  a  better  understanding  of  the  adaptations 
of  organization  and  technique  worked  out  by  legislators  and  adminis- 
trators to  make  effective  the  accepted  principles  of  finance.  It  is  a 
knowledge  of  the  necessity  of  these  adaptations  which  will  be  of 
special  value  in  this  country  where  the  commonly  accepted  precepts 
of  finance  and  government  have  been  so  openly  and  frequently 
violated. 

When  the  text  was  completed,  it  was  decided  to  offer  it  for  publi- 
cation to  the  Institute  for  Government  Research,  a  recently  organized 
agency  for  the  study  of  national  problems  of  which  Mr.  William  F. 
Willoughby  had  been  made  executive  head. 

Since  the  commission  visited  England,  an  interesting  volume  has 
appeared  covering  some  of  the  same  ground,  in  which  slightly  dif- 
ferent conclusions  were  reached.  Reference  is  made  to  "The  System 
of  National  Finance,"  by  E.  Hilton  Young,  M.  P.,  1915,  Smith,  Elder 
and  Company,  publishers.  The  point  of  view  and  popular  treatment 
by  a  member  of  the  British  Parliament  only  gives  added  value  to  the 
more  technical  discussion  of  this  report. 

FREDERICK  A.  CLEVELAND. 

January,  1917. 


FOREWORD 

The  Institute  for  Government  Research  was  incorporated  March  10, 
1916,  and  began  active  operations  October  i  of  the  same  year  with 
headquarters  at  818  Connecticut  Avenue,  Washington,  D.  C.  To  use 
the  words  of  the  prospectus,  issued  immediately  upon  its  incorporation, 
it  is  "an  institution  of  citizens  for  cooperating  with  public  officials  in 
the  scientific  study  of  business  methods  with  a  view  to  promoting  effi- 
ciency in  government  and  advancing  the  science  of  administration." 
The  program  of  action  which  the  Institute  has  taken  to  itself  is  that 
of  seeking  to  bring  into  existence  information  and  ^materials  which 
will  prove  of  value,  both  in  forming  public  opinion  and  in  assisting 
all  officials,  and  particularly  those  of  our  national  government, 
charged  with  the  administration  of  government  affairs  in  their 
efforts  to  put  such  administration  upon  a  more  efficient  basis. 

The  same  motive  actuated  the  appropriation  by  the  Rockefeller 
Foundation,  described  in  the  Editor's  Note,  of  funds  with  which  to 
make  scientific  studies  in  the  field  of  administration.  The  results  of 
the  first  of  these  studies  are  embodied  in  the  present  volume.  After 
its  completion  it  was  offered  to  the  Institute  for  publication.  In 
view  of  the  fact  that  it  so  thoroughly  fitted  in  with  the  Institute's 
program  of  work,  and  also  because  it  had  been  prepared  by  a  com- 
mission, the  chairman  of  which  had  been  selected  as  director  of 
the  Institute,  this  offer  was  willingly  accepted.  It  now  appears  as 
the  first  volume  in  the  series  of  "Studies  in  Administration"  which 
constitutes  one  of  the  series  of  publications  through  which  publicity 
will  be  given  to  such  of  its  work  as  is  of  a  general  educational  char- 
acter. 

FRANK  J.  GOODNOW, 
Chairman,  Institute  for  Government  Research. 

Washington,  D.  C., 
January,  1917. 


INTRODUCTION 

Few  subjects  relating  to  our  government  have  attracted  more 
attention  in  this  country  within  the  last  few  years  than  financial 
administration;  few  need  to  be  more  carefully  overhauled;  and  there 
is  no  system  better  worth  our  study  for  this  purpose  than  that  of 
England.  To  attempt  to  engraft  any  foreign  institution  in  a  new 
land  by  direct  imitation  is  usually  disappointing,  and  sometimes 
mischievous;  but  to  study  it  with  a  view  to  getting  suggestions  for 
improvement  of  one's  own  methods  is  wholly  wise.  We  have  every 
reason  to  be  grateful,  therefore,  to  the  authors  of  this  small  book 
for  their  description  of  the  British  Financial  Administration  in  terms 
so  clear  as  to  be  easily  understood  by  anyone  without  technical 
knowledge,  and  with  a  singularly  well  chosen  proportion  between 
the  different  parts  of  the  subject. 

After  discussing  the  general  principles  that  must  underlie  sound 
public  finance  everywhere,  the  writers  follow  the  course  of  financial 
action  in  England  from  the  preparation  of  the  estimates  in  the 
different  departments,  through  their  consolidation  into  the  measure 
presented  to  Parliament,  the  procedure  of  the  House  of  Commons 
thereon,  the  subsequent  orders  drawn  on  the  Bank  of  England,  the 
expenditure  of  the  money,  and  the  accounting  therefor,  showing  the 
significance  of  each  step  in  the  process  and  its  bearing  upon  what 
goes  before  and  what  follows. 

The  casual  reader  may  be  surprised  at  the  small  amount  of  space 
devoted  to  the  discussion  of  the  appropriations  in  Parliament,  but 
this  is  right,  because,  in  fact,  those  debates  relate  to  the  political 
and  not  the  financial  aspects  of  the  matter.  One  can  say  of  the 
relation  of  the  House  of  Commons  to  the  financial  administration 
what  Bagehot  said  about  the  relation  of  good  ministers  to  depart- 
ments, that  it  is  not  their  business  to  manage  the  finances,  but  to  see 
that  they  are  properly  managed.  The  unity  of  the  financial  manage- 
ment, that  which  makes  it  rational,  depends  upon  the  fact  that  the 
authority  and  responsibility  for  appropriation  and  expenditure  is 
lodged  in  one  hand,  that  of  the  ministry  in  power.  For  we  must 
remember  that,  although  the  imposition  of  taxes  and  the  raising  of 
revenue  thereby  is  a  legislative  matter,  the  expenditure  of  the  money 

xi 


INTRODUCTION 

is  essentially  an  executive  or  administrative  function,  which  ought 
to  be  carried  on  under  the  careful  supervision,  but  not  under  the 
immediate  direction,  of  the  legislature.  After  the  law-making  power 
has  determined  the  objects  for  which  money  is  to  be  spent,  it  is  for 
the  executive  to  attain  those  objects  with  the  greatest  economy  and 
effectiveness,  and  this  cannot  be  done  unless  the  executive  has  a 
free  hand,  unfettered  by  directions  imposed  for  local,  personal  or 
political  motives. 

But  the  executive  cannot  conduct  the  public  finances  properly 
unless  it  has  developed  within  itself  an  appropriate  machinery  as  a 
safeguard  against  extravagance  or  wastefulness.  With  this  machin- 
ery, and  particularly  the  functions  of  the  Treasury  in  framing  the 
estimates  and  controlling  the  expenditure,  the  book  is  chiefly  con- 
cerned. It  can  be  recommended  earnestly  to  all  those  who  want  to 
understand  the  defects  of  our  own  financial  organization,  and  some 
of  the  methods  by  which  that  organization  may  be  improved. 

A.  LAWRENCE  LOWELL. 
Cambridge,  Massachusetts, 
December  20,  1916. 


CONTENTS 

CHAPTER  PAGE 

I.  ANALYSIS  OF  THE  PROBLEM  OF  FINANCIAL  ADMINISTRATION 

OF  A  GOVERNMENT I 

Analysis  of  the  Problem;  Nature  of  a  Budget;  Recom- 
mendations of  President  Taft's  Commission;  The  Prob- 
lem of  Control. 

II.  SOME  FUNDAMENTAL  FEATURES  OF  THE  ENGLISH  SYSTEM  OF 

FINANCIAL  ADMINISTRATION 23 

Fiscal  Year;  Theory  of  Public  Accounts;  Expenditures 
Made  Only  in  Pursuance  of  Appropriation  by  Parliament; 
Historical  Development  of  the  Present  Appropriation  Sys- 
tem; Separation  of  the  Personal  Revenues  and  Expendi- 
tures of  the  Sovereign  and  Those  of  the  State;  The  Civil 
List ;  The  Consolidated  Fund ;  The  Exchequer ;  The  Collec- 
tion and  Expenditure  of  Funds  Authorized  by  Parliament 
Only  Upon  the  Request  or  Approval  of  the  Crown ;  Dis- 
tinction Between  Permanent  and  Annual  Appropriations ; 
Consolidated  Fund  Services ;  Supply  Services. 

III.  THE  ESTIMATES:  PREPARATION  AND  SUBMISSION        .        .      47 

Appropriations  Made  Only  in  Pursuance  of  Formal  Esti- 
mates ;  Estimates  the  Act  of  the  Ministry  as  a  Whole ;  The 
Treasury  the  Authority  for  the  Preparation  and  Submis- 
sion of  the  Estimates ;  Special  Procedure  for  the  Army  and 
Navy  Estimates;  Treasury  Estimates  Circular;  Estimates 
as  Submitted  by  the  Several  Departments  to  the  Treasury 
in  Large  Part  but  a  Summation  of  Provisions  Already 
Approved  by  the  Treasury;  Comparative  and  Explanatory 
Data  Required;  Estimates  to  be  Justified  Though  No 
Increase  Is  Requested;  Preparation  of  Estimates  Within 
the  Departments ;  Examination  of  the  Estimates  by  the 
Treasury;  Transmission  of  the  Estimates  to  the  House  of 
Commons;  Supplementary  Estimates. 

xiii 


CONTENTS 

CHAPTER  PAGE 

IV.  THE  ESTIMATES  :  CHARACTER  AND  FORM      ....      72 

Classification  of  Estimates ;  Appropriation  Heads ;  "Votes"  ; 
Appropriation  Subheads;  Supporting  Details;  Order  of 
Presentation  of  Data;  General  Summaries  and  Analyses. 

V.  THE  ESTIMATES  :  APPROPRIATIONS  IN  AID      ....     100 

Theory  of  Appropriations  in  Aid;  Statement  of  Argu- 
ments in  Favor  of  the  System ;  Criticism  of  the  System ; 
Contrast  with  American  System  of  Reimbursable  Appro- 
priations. 

VI.  THE  ESTIMATES:  ACTION  UPON  IN  PARLIAMENT        .        .115 

Financial  Powers  of  Parliament  Now  Vested  Wholly  in 
the  House  of  Commons;  Rules  of  Procedure  Governing 
the  Consideration  of  Estimates  in  the  House  of  Commons; 
Distinction  Between  the  Authorization  of  Expenditures  and 
the  Appropriation  of  Funds;  Votes  on  Account;  Excess 
Votes ;  Votes  of  Credit ;  Appropriation  Acts ;  Extent  of 
Control  Over  Appropriations  Actually  Exercised  by  the 
House  of  Commons;  Establishment  in  1912  of  the  Select 
Committee  on  Estimates. 

VII.  DISBURSEMENT  OF  PUBLIC  FUNDS        .        .        .        .        .     144 

Control  of  Exchequer  Issues  by  the  Comptroller  and  Au- 
ditor General ;  Grants  of  "Credits"  to  the  Treasury ;  Issues 
of  Money  from  the  Exchequer  to  "Principal  Account- 
ants"; The  Paymaster  General;  Departmental  "Account- 
ing Officers" ;  Personal  Liability  of  Accounting  Officers ; 
Accounting  Officers  Not  Bonded. 

VIII.  TREASURY  CONTROL  OVER   EXPENDITURES        .        .        .     165 

Expenditure  of  Appropriations  Not  Mandatory;  The 
Treasury  the  Authority  for  the  Authorization  of  Expen- 
ditures; Treasury  Control  Over  Organization  and  Per- 
sonnel ;  Treasury  Control  Over  Expenditures  for  Quar- 
ters, Equipment,  Supplies,  etc. ;  Organization  of  the  Treas- 
ury for  the  Exercise  of  Its  Powers  of  Control;  Treasury 
Use  of  Departmental  and  Interdepartmental  Committees 
of  Investigation;  The  Treasury  as  a  General  Organ  of 
Administrative  Control. 

xiv 


CONTENTS 

CHAPTER  PAGE 

IX.  OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS        .        .        .     183 

Distinction  Between  Public  Works  Proper  and  Govern- 
ment Works ;  Government  Works ;  Military  and  Naval  Es- 
tablishments;  Government  Works;  Civil  Services;  Of- 
fice of  Works  and  Public  Buildings;  The  Estimating  and 
Voting  of  Funds  for  Public  Buildings;  Commitments;  Dis- 
tinction Between  Cost  of  Construction,  Maintenance  and 
Repairs,  Operation,  etc. ;  Office  of  Works  and  Public  Build- 
ings Submits  Estimates  for  All  Public  Works  Proper; 
Transfer  of  Funds  from  One  Item  to  Another  in  the 
Works  Program ;  Construction  of  Public  Buildings ;  Rent- 
ing of  Buildings;  Maintenance  and  Repair  of  Buildings; 
Supply  Work  of  the  Office  of  Works  and  Public  Build- 
ings; Powers  of  Office  of  Works  and  Public  Buildings 
to  Control  Expenditures. 

X.  STATIONERY  OFFICE 198 

The  Estimating  and  Voting  of  Funds  for  Stationery  and 
Printing;  Allotment  of  Appropriations;  Procedure  in  Pur- 
chase, Warehousing,  and  Issue  of  Supplies;  Powers  of 
Stationery  Office  to  Control  Expenditures. 

XI.  THE  AUDIT  OF  PUBLIC  ACCOUNTS 209 

History  of  Development  of  the  Present  Audit  System; 
Status  of  the  Comptroller  and  Auditor  General;  The 
Method  of  Keeping  and  Rendering  of  Accounts  Prescribed 
by  the  Treasury;  Audit  of  Public  Accounts;  Powers  of 
Comptroller  and  Auditor  General  in  Respect  to  Disallow- 
ance of  Items;  Duty  of  Comptroller  and  Auditor  General 
in  Respect  to  the  Control  of  Unwise  or  Extravagant  Ex- 
penditures; Standing  Committee  of  Public  Accounts  of 
the  House  of  Commons. 

XII.  THE  SYSTEM  OF  FINANCIAL  REPORTS        ....    235 

Finance  Accounts;  Appropriation  Accounts;  The  Esti- 
mates; Lack  of  Any  General  Report  of  Audited  Receipts 
and  Expenditures. 

XIII.  THE  BUDGET 255 

Financial  Statement,  1914-1915,  Showing  Revenues  and  Ex- 
penditures as  Laid  Before  the  House  of  Commons  by  the 

xv 


CONTENTS 

'EB 

Chancellor  of  the  Exchequer  when  Opening  His  Budget, 
May  4,  1914;  Financial  Statement,  1914-1915,  Explaining 
the  Proposals  Made  by  the  Chancellor  of  the  Exchequer  in 
His  Financial  Statement  on  Monday,  May  4,  1914;  Budget 
Speech  of  the  Chancellor  of  the  Exchequer;  Lack  of  Any 
General,  Comprehensive  Budgetary  Statement. 


XIV.    CONCLUSION 


.    269 


APPENDIX      I.     EXCHEQUER    AND    AUDIT    DEPARTMENTS    ACT, 

1866,  AND  TREASURY  MINUTE  THEREON       .    283 

APPENDIX    II.    CONSOLIDATED  FUND  (No.  i)  BILL,  1912  .        .    314 

APPENDIX  III.     CONSOLIDATED    FUND    (APPROPRIATION)    ACT, 

1912 .        .    316 

APPENDIX  IV.     FORMS   AUTHORIZING  AND   GRANTING  CREDITS 

AND  EXCHEQUER  ISSUES        ;        .        ;  348 


INDEX 


357 


THE  SYSTEM  OF 

FINANCIAL  ADMINISTRATION 

OF  GREAT  BRITAIN 


THE  SYSTEM  OF  FINANCIAL  ADMIN 
ISTRATION  OF  GREAT  BRITAIN 


CHAPTER  I 

ANALYSIS  OF  THE  PROBLEM  OF  FINANCIAL 
ADMINISTRATION   OF  A  GOVERNMENT 

Analysis  of  the  Problem;  Nature  of  a  Budget;  Recommendations  of 
President  Taft's  Commission;  The  Problem  of  Control. 

In  entering  upon  an  examination  of  the  methods  employed  £oint  of 

.   .        ,  Departure 

in  meeting  a  problem  of  any  complexity  it  is  essential  to  have, 

at  the  beginning,  a  clear  understanding  of  the  character  and 
terms  of  the  problem  itself.  Only  as  one  has  such  an  under- 
standing is  it  possible  for  him  to  appreciate  the  significance 
of  the  facts  coming  to  his  attention,  to  determine  whether 
particular  practices  are  or  are  not  of  a  character  to  commend 
themselves — in  a  word,  to  comprehend  and  pass  judgment 
upon  the  features  of  the  system  under  examination.  It  is  to 
be  regretted  that,  so  far  as  this  commission  is  aware,  no  such 
statement  or  analysis  of  the  problem  under  consideration  is 
available.1  This  commission  has,  therefore,  thought  it  desir- 
able, before  proceeding  to  its  report  proper,  to  attempt  at 
least  to  outline  its  undertaking.  By  so  doing  it  is  thought 
that  the  reader  will  be  better  able  to  follow  the  description 

1  The  consideration  of  the  problem  of  the  administration  of  the 
public  finances  given  by  Professor  H.  C.  Adams  in  his  "Science  of 
Finance :  An  Investigation  of  Public  Expenditures  and  Public  Rev- 
enues" (Henry  Holt  &  Co.,  New  York,  1909),  is  in  many  respects 
excellent.  His  analysis  of  the  problem  does  not,  however,  precisely 
meet  the  needs  of  the  present  report. 

I 


BRITISH  FINANCIAL  ADMINISTRATION 


Unity 
of  the 
Problem 


Elements 
to  be 
Considered 


that  is  given  in  the  pages  that  follow  of  the  particular  means 
employed  by  Great  Britain  in  administering  its  finances. 

The  desirability  of  making  such  an  analysis  is  especially 
great  because  of  the  fact,  upon  which  great  emphasis  is  placed 
throughout  this  report,  that  there  is  an  essential  unity  to  be 
observed  in  the  problem  of  administering  the  finances  of  a 
government.  Though  financial  administration  is  an  under- 
taking capable  of  division  into  a  number  of  clearly  distinguish- 
able operations,  such  as  the  preparation  of  estimates,  the  ap- 
propriation of  funds,  accounting,  reporting,  auditing,  etc., 
all  of  these  operations  constitute  but  parts  of  one  system, 
which  are,  or  should  be,  so  integrated  and  adjusted  as  mu- 
tually to  support  each  other  and  together  make  up  one  har- 
monious whole.  Indeed,  it  may  be  said  that  the  merits  of  a 
particular  system  are  almost  wholly  dependent  upon  the  ex- 
tent and  accuracy  with  which  this  adjustment  is  effected.  It 
is  in  the  skill  with  which  this  requirement  has  been  met  that 
one  finds  the  chief  merit  of  the  British  system,  and  in  its  dis- 
regard lies  the  chief  defect  of  the  American  system. 

Analysis  of  the  Problem.  The  operations  involved  in  the 
securing  and  spending  by  a  nation  of  necessary  funds,  whether 
derived  from  revenue  or  loans,  embrace  the  following  distinct, 
but  intimately  related  steps: 

From  the  Revenue  Side : 

1.  The  determination  by  the  law-enacting  authority  (the 
legislature)  of  the  sources  from  which  and  the  con- 
ditions under  which  the  government  revenues  shall  be 
obtained  and  loans  made. 

2.  The  organization  and  operation  by  the  executive,  in 
accordance   with   instructions,   in  part   given   by   the 
legislature  and  in  part  emanating  from  itself,  of  a 
machinery  and  procedure   for  the  collection  of  this 
revenue  and  for  the  sale  of  credit  obligations. 

3.  The  keeping  of  accurate  records  and  books  of  ac- 

2 


ANALYSIS  OF  THE  PROBLEM 

»  count  showing  the  revenues  accruing,  the  credits  sold, 
the  amounts  actually  collected,  and  the  balances  uncol- 
lected. 

4.  The  audit  of  these  accounts,  by  an  officer  independent 
of  the  executive,  for  the  purpose  of  ensuring: 

(a)  That  all  revenues  accruing  and  all  credit  sales 
are  in  fact  collected  or  that  adequate  reason 
exists  for  their  non-collection,  and 

(b)  That  all  sums  collected  are  duly  accounted  for. 

5.  The  rendering  of  reports  summarizing  the  data  pro- 
duced through  these  operations  and  making  known  the 
results  obtained  from  the  revenue  and  loan  system  that 
has  been  established. 

From  the  Custody  Side : 

i.  The  organization  and  maintenance  of  a  treasury  sys- 
tem for  the  receipt,  custody  and  issue  to  paying  officers 
of  the  revenues  and  loans  so  collected. 

From  the  Expenditure  Side : 

1.  The  preparation  by  the  executive  of  estimates  setting 
forth  the  sums  which,  in  its  opinion,  will  be  required 
for  the  due  conduct  of  public  affairs  during  the  period 
to  which  such  estimates  relate. 

2.  The  preparation  by  the  executive  of  a  corresponding 
estimate  of   the  probable   income   from  revenue  and 
loans  that  will  accrue  to  and  be  received  by  the  gov- 
ernment as  the  result  of  the  operation  of  existing  pro- 
visions of  law  regarding  public  dues  and  credit  opera- 
tions during  the  same  period. 

3.  The  preparation  by  the  executive  of  a  statement  show- 
ing the  condition  of  the  public  treasury;  that  is,  a  docu- 
ment in  the  nature  of  a  balance  sheet  showing  the  avail- 
able assets  and  liabilities  of  the  government  at  the  be- 
ginning of  the  period  covered  by  the  two  foregoing 
estimates  or  at  the  date  as  of  which  the  statement  is 
prepared  and  the  estimated  condition  as  of  the  end  of 
the  period  to  be  financed. 

3 


BRITISH  FINANCIAL  ADMINISTRATION 

4.  The  submission  of  these  three  documents  to  the  reve- 
nue-determining   and    fund-granting    authority    (the 
legislature)  in  such  a  form  that  the  relationship  be- 
tween the  actual  and  estimated  receipts,  disbursements 
and  financial  condition  may  be  clearly  seen,  and  espe- 
cially whether,  in  case  the  estimated  revenues  and  bor- 
rowings on  the  one  hand'and  the  estimated  expendi- 
tures on  the  other  are  approved,  a  deficit  or  surplus 
will  result,  and  the  manner  in  which,  in  the  opinion  of 
the  executive,  this  deficit  should  be  met  or  surplus 
utilized. 

5.  The  consideration  of  these  estimates,  financial  state- 
ments, and  recommendations  by  the  legislature  and,  on 
the  basis  of  such  consideration,  the  determination  by 
that  body  of  : 

(a)  What  modifications,  if  any,  should  be  made  in 
the  revenue  and  borrowing  system  as  it  exists; 
and 

(b)  The  sums  that  should  be  appropriated  to  meet 
expenditures  authorized. 

6.  The  organization  and  operation  by  the  executive,  in 
accordance  with  instructions,  in  part  given  by  the  legis- 
lature and  in  part  emanating  from  itself,  of  an  admin- 
istrative machinery  and  the  adoption  of  rules  of  pro- 
cedure to  govern  the  expenditure  of  the  sums  so  placed 
at  its  disposition,  which  machinery  and  procedure  shall 
provide  for: 

(a)  The  steps  to  be  taken  in  directing  or  authorizing 
the  expenditure  of  money,  that  is,  in  incurring 
liabilities ; 

(b)  The  examination  and  adjudication  of  all  claims 
against   the  government  and   certification    for 
payment  of  those  found  to  be  valid ; 

(c)  The  organization  and  operation  of  a   system 
through  which  the  sums  so  found  to  be  due  will 
be  actually  disbursed ;  and 

4 


ANALYSIS  OF  THE  PROBLEM 

(d)  The  requirement  and  use  of  a  system  of  requisi- 
tions, orders,  vouchers  and  other  documents  that 
will  constitute  the  original  warrant  for,  and 
evidence  of,  all  these  expenditure  operations. 

7.  The  keeping  of  books  of  account  in  which  all  these 
transactions,  as  evidenced  by  these  documents,  will  be 
recorded,  with  a  proper  segregation  of  items  to  the 
end  that  not  only  may  a  due  accounting  be  had  of  all 
expenditures  authorized  or  actually  made,  but  also  that 
at  all  times   information  will  be  promptly  available 
regarding  the  purposes   for   which   expenditures   are 
authorized  or  made. 

8.  The  organization  of  a  system  of  financial  reports  to 
the  end  that  at  regular  intervals  complete  information 
regarding  current  assets  and  liabilities,  receipts  and 
expenditures,  may  be  furnished  to  administrative  offi- 
cers, to  the  legislature,  and  to  the  general  public,  so 
that  they  or  any  of  the  several  parties  in  interest  may 
properly  perform  their  duties  in  determining  what  en- 
gagements  shall  be  entered  into,   and  in  controlling 
expenditures  authorized. 

9.  The  audit  of  these  asset,  liability  and  expenditure  ac- 
counts, by  an  officer  independent  of  the  executive,  for 
the  purpose  of  verifying  their  accuracy  and  ensuring 
that  all  legal  requirements  and  conditions,  as  imposed 
by  the  fund-granting  authority,  have  been  complied 
with. 

10.  The  rendering  by  such  audit  officer  of  a  report  to  the 
legislature  setting  forth  the  results  of  his  examination 
of  the  accounts,  and,  as  an  essential  feature  of  such 
report,  giving  to  that  body  complete  and  detailed  in- 
formation regarding  the  manner  in  which  the  funds 
granted  by  it  have  been  expended. 

The  Nature  of  a  Budget.     In  the  foregoing  analysis  we  Unity  of 
have  sought  to  do  two  things:     To  distinguish  carefully  be-  je^ 


BRITISH  FINANCIAL  ADMINISTRATION 

tween  the  several  factors  involved  in  the  problem  of  managing 
the  finances  of  a  government;  and  to  indicate  the  close  rela- 
tionship that  exists  between  these  several  elements.  A  state- 
ment such  as  this  shows  in  a  concrete  way  the  interdependence 
of  the  several  processes  upon  which  we  have  already  laid  so 
much  stress.  It  will  be  seen  that,  on  the  expenditure  side  at 
least,  the  operations  constitute  links  in  an  unbroken  chain, 
starting  with  the  estimates  and  leading  through  the  successive 
links  of:  Consideration  of  these  estimates,  the  granting  of 
funds  based  upon  such  consideration,  the  expenditure  of  the 
funds  so  granted,  the  keeping  of  proper  books  recording  these 
expenditure  operations,  the  rendering  of  proper  accounts,  the 
audit  of  these  accounts,  and  the  making  of  reports  giving  the 
results  of  these  transactions,  which  last  furnishes  the  basis  for 
a  new  estimate  as  the  starting  point  for  another  chain  of  opera- 
tions. 

A  moment's  consideration  will  show  that,  though  this  is 
the  sequence  of  operations  under  almost  any  system,  if  these 
A  Plan  operations  are  to  dovetail  into  each  other  in  such  a  way  that 
ung  the  records  of  one  support  the  others,  all  must  be  planned 
and  carried  out  with  this  end  in  view.  Only  as  this  is  done 
can  a  country  be  said  to  have  an  effective  scheme  of  financial 
administration.  This  means  that  each  process  must  be  treated 
as  a  link  in  an  unbroken  chain  and  there  must  be  an  under- 
lying system  which  has  a  uniform  nomenclature,  segregation 
of  items  and  classification  of  data  devised  to  attain  the  end 
sought.  Unless  this  is  done  the  result  will  be  a  mass  of  data 
that  cannot  be  easily  understood  or  brought  into  comparison, 
and  effective  legislative  and  electoral  control  becomes  im- 
possible. 

Not  only  should  these  several  operations  be  conducted  on 

such  a  basis  and  the  facts  presented  in  such  a  form  as  to  be 

be°EMii         easily  understood'   but  adequate  steps  should  be  taken  by 

Understood     means  of  which  comparisons  and  adjustments  may  actually 

be  made.     Though  each  financial  year  constitutes  a  distinct 

period,  no  one  year  should  be  completely  isolated  and  con- 

6 


ANALYSIS  OF  THE  PROBLEM 

sidered  apart.     If  estimates  of  future  needs  are  to  be  any- 
thing more  than  mere  guesses  they  must  be  based  upon  the 
determined  experience  of  past  years.     Not  only  should  the 
executive,  which  is  charged  with  the  preparation  of  the  esti- 
mates, be  guided  by  such  experience,  but  it  should  submit  its 
estimates  to  the  legislature  in  such  a  form  that  that  body  can  Estimates 
see  at  a  glance  the  extent,  and  the  features  in  respect  to  which,  Based  on6 
these  estimates  depart  from  previous  authorizations  and  actual  Experience 
expenditures  in  accordance  with  such  authorizations. 

Furthermore,  this  statement  of  estimates  of  future  needs 
in   comparison   with   prior   authorizations   and   expenditures 
should  also  be  brought  into  contrast  with  the  resources  of  the 
treasury,  whether  consisting  of  balances  on  hand  or  income 
to  accrue,  from  which  these  proposed  expenditures  will  have  Appropria- 
te be  met.    Finally,  it  is  imperative  that  this  statement  of  prior  should  be 
experience  and  of  estimated  future  needs  should  cover  the  Within 

.  .  r  Resources 

entire  financial  operations  of  the  government  in  one  consoli- 
dated presentation.  Unless  the  legislature  is  given  information 
regarding  the  total  of  past  expenditures,  and  of  liabilities  that 
it  is  asked  to  authorize  for  the  future,  and  the  total  of  the 
resources  that  will  be  available  from  which  to  meet  such  liabili- 
ties, it  will  have  to  work  in  the  dark,  not  knowing  whether 
its  action  will  result  in  a  treasury  deficit  or  surplus.  Only 
as  the  legislature  thus  has  laid  before  it  all  of  this  informa- 
tion so  arranged,  with  the  items  properly  segregated,  totaled, 
compared  and  proved  as  to  their  accuracy,  is  it  possible  for  it 
intelligently  to  perform  its  function  of  determining  what  re- 
ceipts and  expenditures  shall  be  authorized  for  the  coming 
year. 

The  document  through  which  all  this  information  is  brought 
together  in  one  consolidated,  coordinated  and  comparative 
statement  is  technically  known  as  "The  Budget."  "The 
Budget"  thus  is  not  so  much  one  of  the  distinct  financial  opera-  Budget 
tions  of  the  government  as  the  means  through  which  the  sev- 
eral operations,  actual  and  prospective,  are  brought  together 
and  clearly  presented,  to  the  end  that  they  may  all  be  con- 

7 


BRITISH  FINANCIAL  ADMINISTRATION 

sidered  at  one  time  in  their  relations  to  each  other.  A  budget 
is  a  definite  plan  or  proposal  for  financing  the  business  of  a 
future  period  both  with  respect  to  revenues  and  expenditures. 
It  is  usually  prepared  and  submitted  by  the  executive  to  the 
legislative  branch  of  the  government  for  its  approval,  together 
with  such  collateral  and  supporting  information  as  is  needed 
to  sustain  the  conclusions  reached.  Through  a  budget  the 
experience  of  the  past  is  made  available  to  the  legislature  and 
to  the  people  as  a  basis  for  consideration  and  arriving  at  de- 
terminations for  the  future. 

It  is  of  the  utmost  importance  that  this  fundamental  char- 
acter and  purpose  of  the  Budget  should  be  clearly  apprehended. 
It  is  the  one  thing  which  binds  detached  operations  into  a  logi- 
cal and  harmonious  system  and  permits  consideration  of  the 
activities  and  the  cost  of  the  government  as  a  whole.  Without 
it  a  country  can  scarcely  be  said  to  have  a  financial  system, 
certainly  not  a  scientific  system. 

Recommendations  of  President  Taft's  Commission.  The 
best  statement  as  to  the  character  of  data  that  should  be  in- 
cluded in  a  comprehensive  budgetary  statement  is  that  con- 
tained in  the  summary  of  recommendations  of  the  President's 
Commission  on  Economy  and  Efficiency  in  its  report  to  the 
President  on  "The  Need  for  a  National  Budget."  l  The  more 
important  parts  of  these  recommendations  read  : 

"The  commission  recommends : 

1.  That  the  President,  as  the  constitutional  head  of  the 
executive  branch  of  the  Government,  shall  each  year 
submit  to  the  Congress,  not  later  than  the  first  Monday 
after  the  beginning  of  the  regular  session,  a  budget. 

2.  That  the  budget  so  submitted  shall  contain : 

(a)   A  budgetary  message,  setting  forth  in  brief  the 

1  H.  R.  Document  No.  854,  620!  Congress,  2d  Session ;  see  also  Sen- 
ate Document  1113,  62d  Congress,  3d  Session,  "A  Budget." 

8 


ANALYSIS  OF  THE  PROBLEM 

significance  of  the  proposals  to  which  attention 
is  invited. 

(b)  A  summary  financial  statement,  setting  forth  in 
very  summary  form :     ( i )  The  financial  condi- 
tion; (2)  a  statement  of  the  condition  of  ap- 
propriations and  other  data  pertaining  to  the 
'general   fund'   as  well  as  to  the  other   funds 
of  the  Government;  (3)  an  account  of  revenues 
and  expenditures  for  the  last  completed  fiscal 
year;  and  (4)  a  statement  showing  the  effect  of 
past  financial  policy  as  well  as  of  budget  pro- 
posals on  the  general-fund  surplus. 

(c)  A  summary  of  expenditures,  classified  by  ob- 
jects, setting  forth  the  contracting  and  purchas- 
ing relations  of  the  Government. 

(d)  Summaries  of  estimates,  setting  forth: 

(1)  The  estimated  revenues  compared  with 
actual  revenues   for  a  period  of  years. 

(2)  Estimated  expenditures  compared  with 
actual    expenditures    for    a    period    of 
years. 

(e)  A  summary  of  changes  in  law,  setting  forth 
what  legislation  it  is  thought  should  be  enacted 
in  order  to  enable  the  administration  to  transact 
public  business  with  greater  economy  and  effi- 
ciency, i.  e.,  changes  in  organic  law  which,  if 
enacted,  would  affect  appropriations  as  well  as 
the  character  of  work  to  be  done. 

3.  That  the  Secretary  of  the  Treasury  be  required  to  sub- 
mit to  the  Congress  the  following  detailed  reports 
supporting  the  general  summaries  and  Executive  con- 
clusions or  recommendations  contained  in  the  budget, 
as  follows: 

(a)   A  book  of  estimates,  containing  the  supporting 
details  to  the  summaries  of  estimates  of  ex- 
penditures contained  in  the  budget. 
9 


Principles 
of  Respon- 
sibility and 
Accounta- 
bility 


(b)  A  consolidated  financial  report,  containing  a  de- 
tailed statement  of  revenues  and  a  consolidated 
statement  of  expenditures  by  departments  and 
establishments  for  the  last  five  fiscal  years,  with 
such  explanatory  matter  as  is  necessary  to  give 
information  with  respect  to  increases  or  de- 
creases in  revenue  or  expenditure  or  other  re- 
lations to  which  it  is  thought  that  the  attention 
of  the  executive  and  legislative  branches  is  to 
be  given. 

4.  That  the  head  of  each  department  and  independent  es- 
tablishment should  be  required  to  submit  to  the  Secre- 
tary of  the  Treasury  and  to  the  Congress  annual  re- 
ports which,  among  other  things,  would  contain 
detailed  accounts  of  expenditures  so  classified  as  to 
show  amounts  expended  by  appropriations,  as  well  as 
by  classes  of  work,  together  with  the  amounts  of  in- 
crease or  decrease  in  stores,  equipment,  property,  etc., 
including  lands,  buildings  and  other  improvements,  as 
well  as  such  other  data  or  operative  statistics  and  com- 
ment in  relation  thereto  as  may  be  necessary  to  show 
results  obtained  and  the  economy  and  efficiency  of 
doing  government  work  as  well  as  of  contracting  and 
purchasing." 

The  Problem  of  Control.  In  the  foregoing  outline  we  have 
dealt  with  what  may  be  called  the  mechanics  of  the  problem. 
If  this  machinery,  however,  is  to  work  smoothly,  and  give 
good  results,  a  vital  principle  must  find  expression  through- 
out the  entire  chain  of  operations.  This  is  the  principle  of 
responsibility,  accountability  and  control.  It  goes  without  say- 
ing that  the  great  end  to  be  sought  in  the  administration  of 
the  finances  of  a  nation  is  the  ensuring  that  the  maximum  o.f 
economy  and  efficiency  will  obtain  in  the  determination  of 
what  the  government  shall  do  and  in  the  execution  of  the 
work  determined  upon.  A  study  of  the  problem  of  financial 

10 


ANALYSIS  OF  THE  PROBLEM 

administration  in  its  practical  aspects  shows  that  opportunities 
for  misapplication  of  funds,  waste,  and,  in  many  cases,  actual 
fraud,  exist  at  almost  every  step.  In  estimating  and  in  appro- 
priating for  future  needs,  expenditures  may  be  included  for 
purposes  having  little  or  no  real  utility,  or  at  least  for  pur- 
poses where  the  utility  is  relatively  little  in  comparison  with 
other  needs  for  which  no,  or  inadequate,  provision  is  made. 
A  glaring  example  of  waste  in  this  way  is  the  admittedly  gross 
misapplication  of  funds  in  the  United  States  for  public  works, 
public  buildings,  and  Army,  Navy,  and  other  posts,  for  which 
no  real  public  need  exists. 

Again,  in  the  expenditure  of  the  funds  appropriated,  loss  pfripC.iP1,e.s 
may  occur  at  every  point.  Receivers  of  public  moneys,  cus-  and  Effi- 
todians  of  public  funds,  and  those  having  money  placed  in  c 
their  hands  with  which  to  make  payment  of  claims  may 
through  fraud  or  carelessness  fail  to  account  for  all  money 
coming  into  their  possession.  Executive  officials  intrusted 
with  the  discretion  of  authorizing  the  incurring  of  obligations, 
though  guilty  of  no  fraud,  may  exercise  this  discretion  in  a 
careless  or  inefficient  manner ;  excessive  salaries  may  be  paid ; 
the  purchase  of  materials  not  needed  or  of  a  quality  more 
expensive  than  conditions  call  for  may  be  authorized;  ma- 
terials and  supplies  in  themselves  proper  may  be  used  in  a 
wasteful  manner;  a  large  number  of  employees  may  be  em- 
ployed to  do  work  which  a  smaller  number,,  properly  directed 
and  supervised,  could  readily  perform;  public  property  may 
be  converted  to  private  use;  and  in  scores  of  ways  the  gov- 
ernment may  fail  to  receive  a  due  return  for  its  financial  sacri- 
fices. 

It  is  important  to  note  that  these  opportunities  for  loss  do  The  Need 
not  arise  solely  from  the  fact  that  in  all  large  bodies  of  men  tive 
there  are  sure  to  be  persons  who  are  dishonest  or  inefficient. 
The  greatest  difficulty  that  has  to  be  met  arises   from  the 
fact  that  often  the  interest  of  the   individual  parts  of  the 
government  are,  or  seem  to  be,  in  opposition  to  the  interest 
of  the  government  as  a  whole.     The  officials  in  charge  of 

n 


BRITISH  FINANCIAL  ADMINISTRATION 


Central 
Control 
Essential  to 
Wise 
Expenditure 


each  branch  of  the  government  service  and,  in  large  part,  of 
each  subdivision  of  a  branch,  are  concerned  with  the  in- 
terests of  that  branch  or  subdivision  and  feel  a  responsibility 
only  to  a  limited  extent  for  the  government  as  a  whole,  or  for 
the  service  of  which  they  are  a  part.  Even  if  they  have  such 
an  appreciation  it  is  but  natural  that  they  should  feel  that 
the  importance  of  their  work  is  greater  or  more  urgent  than 
that  of  many  other  government  operations.  It  is  inevitable 
that  their  attitude  should  be  that  of  seeking  to  secure  for  the 
work  intrusted  to  them  the  largest  appropriation  of  funds 
that  it  is  possible  to  obtain.  They  feel  that  there  is  a  lump 
sum  available  for  the  support  of  the  government,  that  all  this 
money  will  be  spent  in  some  way,  that  if  they  do  not  get  it 
some  other  service  will,  and  that  no  real  economy  will  result 
by  their  moderating  their  demands.  From  the  expenditure 
side  they  are  not  only  interested  in  having  their  employees 
highly  paid,  in  having  the  use  of  comfortable  quarters,  and 
in  making  use  of  high  class  materials  and  supplies,  but  they 
have  the  feeling  that  any  savings  resulting  from  their  deny- 
ing themselves  in  these  respects  will  but  mean  that  larger 
opportunities  for  extravagance  will  be  opened  up  to  the  other 
services.  It  must  be  recognized  that  the  actual  expenditure 
of  moneys  takes  place  in  these  subordinate,  or  working,  units, 
and  it  is  precisely  in  these  units  that  the  interest  in  the  public 
treasury  as  a  whole  is  the  weakest. 

These  are  the  fundamental  conditions  that  have  to  be  faced 
if  real  economy  and  efficiency  are  to  be  secured  in  the  adminis- 
tration of  the  public  finances.  There  is  but  one  way  through 
which  these  difficulties  can  be  overcome,  namely,  through  pro- 
viding means  by  whfch  a  rigid  supervision,  control,  and  ac- 
counting may  be  exercised  at  every  step  from  the  first  esti- 
mating of  the  needs  of  the  several  services  to  the  final  expendi- 
ture of  the  sums  voted.  It  is  impossible  to  overestimate  the 
importance  of  this  consideration.  The  most  perfect  system 
for  performing  the  mechanical  operations  involved  in  admin- 
istering the  finances  of  a  government  will  utterly  fail  to  secure 

12 


ANALYSIS  OF  THE  PROBLEM 

economy  and  efficiency  unless  this  exceedingly  difficult  problem 
of  supervision  and  control  is  properly  met. 

This  supervision  and  control  must,  moreover,  be  a  real  and  Control 
not  merely  a  nominal  one  as  is  so  often  the  case.     It  must  Reai 
be  exercised  by  an  officer  who  himself  has  the  knowledge  per- 
mitting him  to  perform  this  function  intelligently,  and  is  him- 
self subject  to  supervision  and  control  in  respect  to  the  man- 
ner in  which  he  performs  his  duty. 

The  importance  of  this  principle  and  some  of  the  difficul-  The  Prep- 

,.  j    .  ...         .,    .    ,  ,.  ,  ,  aration  of 

ties  presented  m  putting  it  into  practice  may  be  seen  by  run-  Estimates  i 
ning  through,  from  this  point  of  view,  the  several  operations  ?'"**  SteP 

'  m  Control 

involved  m  the  management  of  the  finances  of  a  government 
as  enumerated  above.  The  starting  point  in  these  operations, 
as  has  been  pointed  out,  is  the  preparation  of  the  estimates. 
In  performing  this  operation  the  first  step  is  the  submission, 
by  each  working  unit  of  the  government  to  the  head  of  the 
service  of  which  it  is  a  part,  of  a  statement  of  the  funds  that 
it  will  require  in  order  to  perform  the  work  that  it  pur- 
poses to  put  through.  These  units,  as  already  indicated,  are 
not  interested,  except  in  the  most  incidental  and  indirect 
way,  in  the  general  financial  problem  of  the  service  as  a  whole 
or  of  the  government  as  a  whole.  Their  interest  is  in  their 
own  work,  and  their  natural  and  legitimate  desire  is  to  secure 
funds  for  its  extension.  There  is  thus  presented  at  the  very 
outset  a  necessity  for  supervision  and  revision  of  these  esti- 
mates as  first  submitted.  If  this  is  not  done  it  is  certain  that 
the  total  of  the  estimates  as  finally  aggregated  will  far  exceed 
the  amount  with  which  it  is  advisable  to  charge  the  Treasury. 
The  first  point  at  which  control  should  be  exercised  is  there- 
fore found  on  the  desks  of  the  heads  of  the  several  branches 
of  the  public  service.  Upon  them  should  fall  the  duty  of 
rigidly  scrutinizing  all  requests  for  funds  submitted  to  them 
by  their  subordinates,  of  comparing  them  with  current  appro- 
priations and  past  expenditures,  and  of  taking  such  action 
as  will  ensure  that  no  funds  are  asked  for  beyond  those  neces- 
sary for  the  economical  administration  of  the  affairs  of  their 

13 


BRITISH  FINANCIAL  ADMINISTRATION 


Review  by 
Department 
Head 


Central 

Executive 

Review 

and 

Revision 


Legislative 
Review 
and   Ap- 
proval  or 
Disapproval 


services,  and  snch  expansion  in  the  scope  of  their  work  as  gen- 
eral financial  and  other  conditions  warrant.  Control  at  this 
point  is  vital  since  the  heads  of  the  several  services  alone  are 
in  possession  of  that  personal  and  direct  knowledge  of  con- 
ditions and  needs  which  will  enable  control  to  be  exercised  in 
the  most  efficient  manner. 

The  second  point  at  which  an  opportunity  for  control  ap- 
pears is  where  the  estimates,  as  revised  by  the  heads  of  the 
several  services,  are  submitted  to  the  heads  of  the  great  de- 
partments or  other  main  branches  of  the  government  service 
of  which  they  are  the  primary  subdivisions.  Here  the  con- 
trol must  be  of  a  more  general  character.  In  many  cases  it 
will  rest  upon  considerations  of  general  policy  rather  than 
upon  the  question  of  whether  the  sums  asked  for  to  perform 
a  given  amount  of  work  are  or  are  not  excessive.  Never- 
theless, if  proper  financial  and  work  records  are  maintained, 
there  exists  at  this  point  opportunity  for  a  real  scrutiny  of 
financial  needs  in  relation  to  work  to  be  done. 

The  third  opportunity  for  control  presents  itself  when  the 
requests  for  funds  are  aggregated  into  a  consolidated  esti- 
mate of  expenditures  for  submission  to  the  fund-granting 
authority.  This  work  of  aggregation  and  submission  is,  in 
most  systems,  performed  by  the  chief  financial  officer  of 
the  government.  A  question  of  great  importance  thus  arises 
at  this  point,  as  to  whether  the  duties  of  this  officer  in  respect 
to  estimates  are  purely  ministerial  or  whether  they  include  the 
authority  to  suggest,  and  if  need  be  to  enforce,  the  modifica- 
tion of  the  estimates  as  reviewed  by  him  with  a  view  to  the 
reduction  in  the  sums  asked  for,  or  their  modification  so  as 
to  make  them  conform  more  nearly  to  his  views  in  respect 
to  the  financial  needs  of  the  services  involved. 

The  next  stage  in  the  history  of  the  budget  is  its  examina- 
tion by  the  legislature.  It  is  hardly  necessary  to  point  out 
that  opportunity  is  here  afforded  for  the  exercise  of  a  most 
effective  control  on  the  part  of  the  fund-granting  over  the 
fund-expending  authorities.  The  extent  to  which  this  oppor- 

14 


ANALYSIS  OF  THE  PROBLEM 

tunity  is  availed  of,  and  the  means  or  procedure  employed 
in  exercising  this  opportunity  for  control,  constitute  one  of 
the  most  significant  and  important  features  of  the  financial 
system  of  a  country. 

There  is  still  one  other  authority  by  whom  at  least  a  cer- 
tain moral  control  may  be  exercised.  Reference  is  had  to 
the  general  public.  Provision  can  be  and,  in  certain  cases, 
is  made  for  the  publication  of  the  estimates  as  tentatively  pre- 
pared for  submission  to  the  legislature,  and  the  granting  to 
interested  parties  of  an  opportunity  to  urge  upon  the  govern- 
ment such  changes  as  the  increase  or  decrease  of  funds  for 
particular  purposes.  This  practice,  it  should  be  observed,  is 
one  which  is  more  applicable,  and  more  usually  employed  in 
respect  to,  municipal  or  local  budgets  than  those  for  national 
governments. 

The  fundamental  feature  which  distinguishes  democratic  Public 
from  autocratic  government  is  this :  That  in  a  democracy  the  controfling 
government  in  last  analysis  is  controlled  by  the  will  of  the  Force 
people — the  wishes  of  a  majority  of  the  governed;  whereas 
in  an  autocracy  the  government  in  last  analysis  is  controlled 
by  the  will  of  a  ruler  who  is  accepted  as  sovereign  and  who 
considers  that  the  people  are  his  subjects.  The  one  bases  its 
institutions  on  voluntary  cooperation,  taking  the  will  of  a 
majority  as  the  will  of  all;  the  other  bases  its  institutions  on 
servitude.  Democratic  and  autocratic,  however,  are  relative 
terms.  Autocracies  are  never  absolute,  and  democracies  have 
difficulty  in  finding  the  means  of  determining,  expressing,  and 
making  effective  the  will  of  a  majority.  One  of  the  means 
of  doing  this  is  through  a  representative  body  called  a  parlia- 
ment or  legislature — a  meeting  of  chosen  representatives  of 
the  people  to  parley,  to  consider,  to  act  on  propositions  which 
are  brought  before  them.  But  representatives  must  be  chosen, 
and  even  they  may  misrepresent  what  the  people  want.  A 
second  and  still  more  popular  agency  therefor,  called  the 
"electorate,"  has  been  created,  which  sits  in  judgment  on  defi- 
nitely formulated  propositions  and  issues  which  may  be 

15 


BRITISH  FINANCIAL  ADMINISTRATION 


The  Repre- 
sentative 
Body  as  a 
Forum 


The  Defini- 
tion of 
Issues 


brought  before  it.  It  is  in  their  importance  to  this  ultimate 
authority — the  electorate — that  budget  procedures,  in  the 
course  of  their  development,  find  their  greatest  constitutional 
significance.1 

The  constitutional  significance  of  an  effective  budget  pro- 
cedure is  that  it  provides  a  means  for  making  both  the  execu- 
tive and  the  legislative  bodies  responsive  and  responsible  to 
the  will  of  the  people.  This  is  done  not  alone  by  making  the 
estimates  public  property  by  having  them  printed.  Such  pub- 
licity is  of  small  importance;  they  have  to  do  with  highly 
complex  and  technical  subjects;  and  even  if  they  were  per- 
fectly understood  by  each  of  ten,  fifty,  or  one  hundred  million 
people  it  would  be  necessary  to  provide  some  practical  way 
for  having  issues  formulated,  discussed  and  decided.  An 
effective  budget  procedure  utilizes  the  machinery  of  gov- 
ernment for  doing  all  these  things.  Responsibility  is  definitely 
located  with  the  executive  for  the  preparation,  submission, 
explanation  and  defense  of  reports  on  the  doings  of  the 
past  and  of  plans  for  the  future.  Definite  responsibility  is 
placed  in  the  legislature  (as  the  representatives  of  the  people 
who  have  no  responsibility  for  administration)  for  independ- 
ent review,  criticism,  approval  or  disapproval.  Since  every 
public  undertaking  is  necessarily  based  on  some  concept  or 
theory  of  welfare,  and  with  respect  to  these  different  men 
may  hold  different  opinions,  procedures  have  been  devised 
which  provide  for  first  getting  before  all  the  representatives 
of  the  people  a  full  statement  of  facts,  and  then  for  giving 
to  those  who  oppose  and  those  who  favor  the  proposals  be- 
fore them  an  opportunity  to  formulate  and  discuss  the  issues 
raised.  During  the  last  century  a  legislative  procedure  has 
been  developed  which  is  adapted  to  doing  three  things:  (i) 
To  define  clearly  the  issues  raised  both  on  questions  of  gen- 
eral policy  and  on  details  of  proposals;  (2)  having  done  this, 

1  See  discussion  of  Constitutional  and  Administrative  Purpose  of  a 
Budget  in  Municipal  Research,  Nos.  57,  58,  61,  62,  69,  70,  72  and  73, 
published  by  the  Bureau  of  Municipal  Research,  New  York,  1915-16. 

16 


ANALYSIS  OF  THE  PROBLEM 

to  get  an  expression  of  the  will  of  a  majority  of  representa-  The  Elec- 
tives  of  the  people  which  is  taken  as  the  will  of  a  majority  p^ai  * 
of  the  people — unless  the  legislature  decides  against  the  execu-  Arbitrator 
tive;  (3)  in  the  event  that  decision  is  against  the  executive, 
to  provide  for  an  appeal  directly  to  the  "electorate."     This 
last  step  in  the  procedure  is  called  "dissolution,"  and  has  been 
adopted  to  take  both  the  question  under  discussion  and  the 
parties  themselves  before  the  voters  to  determine  what  pol- 
icy and  party  advocate  will  be  supported  by  a  majority  of 
the   "electorate."     By  use  of  such  a  procedure  the  budget 
becomes  the  most  important  constitutional  method  for  making 
the  government   responsible   and   responsive  to   the   popular 
will. 

In  the  foregoing  we  have  considered  only  the  general  prob- 
lem of  control  in  the  estimating  and  granting  of  funds  for 
government  needs.  With  funds  once  granted  the  problem  pre- 
sents itself  of  organizing  such  a  system  of  control  as  will 
ensure  that  the  moneys  granted  will  be  expended  in  an  effi- 
cient and  economical  manner.  Reference  is  not  here  made  to 
that  kind  of  control  involved  in  ensuring  that  moneys  voted 
shall  be  expended  strictly  in  accordance  with  law;  and  that 
no  money  shall  be  paid  out  except  for  services  actually  ren- 
dered or  goods  received.  This  control  is  that  performed 
through  a  system  of  audit  that  will  receive  attention  in  an- 
other part  of  this  report.  The  control  here  considered  is  that 
involving  the  exercise  of  personal  discretion. 

Generally  speaking,  control  involving  personal  discretion  is 
exercised  at  three  points:  (i)  In  the  legislature;  (2)  in  the 
central  financial  department  of  the  government;  and  (3)  in 
the  several  departments  or  where  account  of  the  expenditure 
is  made. 

The  estimates  of  financial  needs  should  be,  and  in  most   Control 
cases  are,  prepared  and  submitted  in  great  detail  to  the  end  consistent 

that  the  appropriating  authority  may  have  before  it  complete  with  ,tne 
.    ,  .  .....  Use  of 

information  regarding  the  way  in  which  prior  grants  have  Discretion 

been  expended,  and  the  items  entering  into  the  total  sums 

17 


BRITISH  FINANCIAL  ADMINISTRATION 


Forms  of 
Acts  of  Ap- 
propriation 


Legislative 
Encroach- 
ment on 
Executive 
Discretion 


requested  for  the  ensuing  year.  This  itemization  constitutes 
the  justification  on  the  part  of  the  several  services  for  their 
requests.  It  by  no  means  follows  that  because  these  detailed 
data  are  submitted  the  act  of  appropriation  should  enter  into 
the  same  itemization.  Did  it  do  so,  and  were  no  provision 
made  by  which  it  might  be  departed  from,  the  result  would 
be  that  little  or  no  discretion  would  be  left  to  the  spending 
departments  and  the  latter  would  at  times  be  seriously  em- 
barrassed in  meeting  contingencies  as  they  arise.  It  is  evi- 
dent that  a  wide  range  of  choice  is  here  presented  to  the  legis- 
lature as  regards  the  policy  to  be  pursued  by  it :  ( i )  It  may 
have  the  appropriation  act  or  acts  in  substantially  the  same 
form  and  detail  as  the  estimates;  (2)  it  may  have  the  ap- 
propriation in  substantially  this  form  but  provide  that  the 
assignment  of  funds  may  be  departed  from  under  certain  con- 
ditions or  within  certain  limitations;  (3)  it  may  make  the 
appropriations  in  substantially  this  form,  but  provide  that  the 
assignment  of  funds  may  be  departed  from  upon  the  approval 
of  some  designated  authority  being  first  obtained;  or  (4)  it 
may  pass  the  appropriations  in  such  a  form  that  the  sums 
voted  are  allocated  to  main  heads  only,  thus  leaving  to  the 
spending  departments  large  discretion  in  respect  to  the  de- 
tails of  expenditure. 

The  foregoing  does  not  exhaust  the  possible  diversities  of 
practice.  The  enumeration  that  has  been  made  has  had  for 
its  purpose  merely  to  bring  out  that  here,  at  this  initial  stage 
of  the  proceedings  for  rendering  funds  available  for  expendi- 
ture, there  is  presented  the  important  question  as  to  where 
discretion  in  respect  to  the  expenditure  of  funds  voted 'shall 
rest.  If  the  legislature  makes  the  appropriations  in  detail  and 
makes  no  adequate  provision  by  which  departure  from  this 
assignment  may  be  had,  that  body  assumes  the  major  responsi- 
bility for  controlling  the  expenditure  of  funds.  The  policy 
of  control  here  followed  is  that  of  attempting  to  control  by 
specification  in  advance,  and  the  minimum  of  discretion  is 
left  to  the  expending  authorities.  This  is  the  policy  which 

18 


ANALYSIS  OF  THE  PROBLEM 

is  generally  followed  by  the  Congress  of  the  United  States 
in  providing  for  the  expenditure  of  the  Federal  Government, 
though  there  are  important  exceptions  to  the  rule.  As  will 
be  seen  hereafter,  the  appropriation  system  of  the  British  Gov- 
ernment rests  upon  the  contrary  principle,  that  of  having  the 
appropriation  of  funds  binding  only  as  regards  certain  large 
heads  and  of  permitting  the  exercise  of  a  wide  discretion  on 
the  part  of  the  executive  in  respect  to  the  employment  of  the 
funds  under  these  general  heads. 

The  adoption  of  this  second  policy  means  that  provision  Administra- 

,  ,      ,         ,  ,  ,  .  live  Control 

must  be  made  for  the  exercise  of  control  at  some  point  over  Through  a 
the  departments  actually  expending  the  money.  To  leave  to  Fmance  De~ 
the  latter  complete  freedom  to  spend  the  money  voted  as  they 
see  fit,  except  as  controlled  by  the  appropriation  to  the  few 
main  heads,  would  manifestly  be  unwise.  The  first  point  at 
which  this  additional  or  secondary  control  may  be  exercised 
is  in  the  finance  department.  A  very  important  feature  of 
any  financial  system  following  this  second  principle  of  appro^ 
priation  by  main  heads  only  is  thus  the  extent  to  which,  if 
at  all,  the  legislature  has  delegated  to  the  central  financial 
department  of  the  government  the  authority  to  exercise  a  con- 
trol or  supervision  over  the  several  spending  departments  in 
respect  to  the  utilization  of  the  funds  that  have  been  granted 
to  them,  the  machinery  that  has  been  provided  through  which 
this  control  may  be  exerted,  and  the  manner  in  which  it  is 
in  fact  exercised. 

A  reading  of  this  report  will  bring  out  the  fact  that  in  re-  Fundamen- 
spect  to  this  matter  the  English  Government  has  developed  a  ence      "" 
system  of  remarkable  efficiency.     To  understand  the  signifi-  Between 
cance  of  this  system  one  has  to  appreciate  that  the  whole  theory  American11 
of  the  relationship  that  exists  between  the  legislative  and  the  systems 
executive  under  the  English  constitutional  system  is  funda- 
mentally different  from  the  one  that  obtains  in  the  govern- 
ment of  the  United  States.     Our  administrative  system  is 
based  on  the  principle  that,  as  regards  both  financial  affairs 
and  the  general  conduct  of  work,  the  several  departments  are 

19 


BRITISH  FINANCIAL  ADMINISTRATION 


The  English 
Treasury 


Control 
over  Ex- 
penditures 


completely  independent  and  coordinate  units,  each  working 
under  the  direct  authority  of  Congress.  Little  or  no  pro- 
vision exists  for  the  exercise  by  one  department  of  any 
authority  over  other  departments,  and  little  provision  is 
made  for  the  exercise  of  central  executive  control  over  details 
of  administration.  The  only  possible  exception  to  this  is  the 
power  that  the  Comptroller  of  the  Treasury  has  of  prescrib- 
ing the  manner  of  keeping  and  rendering  accounts.  Even  this 
power  has  been  interpreted  as  referring  only  to  the  keeping 
and  rendering  of  such  accounts  as  are  necessary  in  order  that 
the  comptroller  and  auditors  may  properly  perform  their 
duties.  So  firmly  is  this  principle  established  that  any  at- 
tempt on  the  part  of  one  department  to  supervise  or  control 
the  affairs  of  another  would  be  strenuously  resented.  It  is 
even  doubted  whether  the  President  himself  has  power  of  gen- 
eral direction  and  control  over  purely  administrative  matters 
except  as  such  powers  have  been  expressly  granted  to  him 
by  statute. 

In  England,  on  the  other  hand,  the  principle  is  definitely 
recognized  that  the  Treasury  Department  has  large  powers  of 
control  over  the  financial  transactions  of  all  the  other  admin- 
istrative services.  In  a  way  it  may  almost  be  said  that  this 
department  is  an  agent  or  organ  of  Parliament  for  controlling 
the  administrative  services  rather  than  a  part  of  the  adminis- 
trative service  proper.  This  power  of  the  Treasury,  the  means 
through  and  the  manner  in  which  it  is  exercised,  will  con- 
stitute one  of  the  most  important  points  considered  in  this 
report. 

The  next  point  at  which  control  over  expenditures  may  be 
exercised  is  in  the  offices  of  the  directing  heads  of  the  several 
departments.  In  the  same  way  that  powers  may  be  given  to 
such  heads  to  revise  the  estimates  submitted  to  them  by  the 
heads  of  the  services  comprehended  under  their  departments, 
so  authority  may  be  given  to  them  to  control  in  whole  or  in 
part  the  expenditure  of  the  funds  finally  granted.  This  con- 
trol may  be  exercised  in  the  way  of  allotting  to  subheads  the 

20 


ANALYSIS  OF  THE  PROBLEM 

moneys  appropriated  under  main  heads,  or  authorizing  trans- 
fers from  one  subhead  to  another,  etc.1 

In  the  foregoing  we  have  considered  the  problem  of  con-  Control  ever 

Purchases 

trol  from  one  standpoint  only,  that  of  the  determination  of  and  Work 
the  manner  in  which  funds  voted  shall  be  allotted  to  specific 
activities.  There  remains  another  feature  in  respect  to  which 
control  may  be  exercised  that  is  no  less  important.  Reference 
is  had  to  the  matter  of  control  over  purchases  and  the  use 
of  things  bought  by  the  agencies  created  by  the  government 
for  doing  work.  The  things  bought  fall  in  two  main  cate- 
gories :  ( i )  Personal  service,  and  ( 2  )  non-personal  service ; 
such  things  as  transportation,  quarters,  equipment,  supplies, 
etc.  Here  we  have  directly  to  do  with  expenditures  for 
the  things  which  are  to  be  acquired  for  use.  Control  in 
respect  to  what  work  shall  be  performed  can  of  course  bring 
about  economy  in  ensuring  that  no  work  not  of  real  necessity 
or  utility  shall  be  undertaken.  It  can  reduce  or  eliminate  the 
enormous  waste  of  funds  resulting  from  the  performance  of 
work  for  which  there  is  no  real  public  need.  Especially  can 
it  prevent  in  whole  or  in  part  the  misapplication  of  things 
purchased  in  the  operation  of  public  works  of  no  or  of  doubt- 
ful utility.  This  control  is  at  most  only  collateral,  however, 
in  that  a  waste  or  misapplication  of  funds  in  making  pur- 
chases can  take  place  in  the  carrying  through  of  works  con- 
cerning the  utility  or  necessity  of  which  there  is  no  question. 
In  performing  such  work  an  unnecessary  number  of  persons 
may  be  employed,  excessive  salaries  may  be  paid,  supplies  may 
be  purchased  at  excessive  rates,  and,  generally,  expenditures 
may  be  made  in  a  wasteful  manner.  If  efficiency  and  econ- 
omy are  to  be  secured  in  respect  to  these  factors  some  pro- 
vision must  be  made  for  the  exercise  of  due  supervision  and 
control  over  specific  expenditures  of  this  character.2 

1  For  a  consideration  of  the  problem  of  exerting  control  in  this  way 
see  W.  F.  Willoughby :   "Allotment  of  Funds  by  Executive  Officials, 
an  Essential  Feature  of  any  Correct  Budgetary  System."     Proceed- 
ings of  the  American  Political  Science  Association  (1912). 

2  See  Municipal  Research,  Nos.  57  and  58. 

21 


BRITISH  FINANCIAL  ADMINISTRATION 


Administra- 
tive Means 
of  Control 
over 
Purchases 


A  Study  of 
Methods 
of  Control 


Consideration  of  the  problem  of  efficiency  and  economy  in 
the  purchase  of  personal  service  and  supplies  brings  up  the 
need  for  well-organized  civil  service  and  supply  departments 
— divisions  for  administering  the  two  categories  into  which  all 
ordinary  expenditures  for  current  operation  and  maintenance 
can  be  made  to  fall.  If  the  study  of  the  financial  system  of 
a  government  is  to  be  complete,  due  attention  must  conse- 
quently be  given  to:  (i)  The  system  provided  for  the  de- 
termination of  the  number  of  employees  that  may  be  engaged, 
the  manner  of  their  recruitment,  their  classification,  compen- 
sation, condition  of  service,  etc.;  and  (2)  the  system  pro- 
vided for  the  purchase,  inspection,  warehousing,  requisition, 
issue  and  consumption  of  stores.  Here,  or  elsewhere,  economy 
and  efficiency  can  be  secured  only  by  the  provision  of  means 
that  will  ensure  a  rigid  supervision  and  control  over  the  spend- 
ing units.  In  the  present  report  not  a  little  attention  will  be 
given  to  this  matter. 

We  have  considered  this  problem  of  control  at  some  length, 
since  there  is  no  feature  of  financial  administration  that  is 
of  greater  importance.  It  is  moreover  the  feature  to  which 
the  commission  devoted  its  chief  attention  in  the  study  of 
the  English  financial  system.  Especially  did  it  seek,  through 
personal  interviews  with  officials  concerned  with  all  the  opera- 
tions involved,  to  determine  not  only  the  extent  to  which  pro- 
vision for  control  existed,  but  the  effectiveness  with  which 
this  control  was  in  fact  exerted.  The  results  of  its  inquiries 
showed  that  this  problem  had  been  worked  out  with  excep- 
tional thoroughness.  In  no  other  respect  is  the  English  sys- 
tem more  worthy  of  careful  study.  Should  this  report  serve 
no  other  purpose  than  that  of  making  known  the  means  by 
which  England  has  successfully  met  this  primary  requisite  of 
a  sound  financial  system,  it  will,  it  is  believed,  far  more  than 
justify  the  expense  and  labor  involved  in  its  preparation. 


CHAPTER  II 


Fiscal  Year;  Theory  of  Public  Accounts;  Expenditures  Made  Only  in 
Pursuance  of  Appropriation  by  Parliament;  Historical  Develop- 
ment of  the  Present  Appropriation  System ;  Separation  of  the 
Personal  Revenues  and  Expenditures  of  the  Sovereign  and  Those 
of  the  State;  The  Civil  List;  The  Consolidated  Fund;  The  Ex- 
chequer; The  Collection  and  Expenditure  of  Funds  Authorized  by 
Parliament  Only  Upon  the  Request  or  Approval  of  the  Crown; 
Distinction  between  Permanent  and  Annual  Appropriations;  Con- 
solidated Fund  Services;  Supply  Services. 

In  our  analysis  of  the  problem  of  the  financial  administra- 
tion of  a  government  the  several  operations  involved  were 
grouped  under  the  three  heads  of  receipt,  custody,  and  dis- 
bursement of  public  funds.  Although,  for  purposes  of  com- 
pleteness, mention  was  then  made  of  the  problems  having  to 
do  with  the  raising  of  revenue,  no  attempt  is  made  in  this 
report  to  give  an  account  of  the  manner  in  which  these  prob- 
lems are  met  by  the  Government  of  Great  Britain.  The  in- 
vestigation was  undertaken  for  the  purpose  of  determining 
the  principles  and  methods  employed  by  that  country  in  the 
voting  and  spending  of  treasury  resources.  Our  report  there- 
fore will  cover  only  the  operations  having  to  do  with  the 
custody,  voting,  and  disbursement  of  public  moneys. 

In  general  our  account  will  follow  closely  the  order  of 
operations  outlined  in  our  analysis.  Therefore  a  description 
will  first  be  given  of  the  system  made  use  of  by  the  English 
Government  for  the  custody  of  its  funds.  In  order  that  this 
system,  as  well  as  the  subsequent  operations  having  to  do 
with  the  voting  and  expending  of  moneys,  may  be  understood, 

23 


BRITISH  FINANCIAL  ADMINISTRATION 


Two 

Systems  of 
Public 
Accounting 


it  is  necessary  that  some  account  should  be  given  of  certain 
fundamental  features  that  lie  at  the  very  basis  of  the  whole 
English  financial  system. 

The  Fiscal  Year.  An  essential  feature  of  any  financial 
system  is  that  some  definite  period  shall  be  adopted  to  which 
estimates,  accounts  and  reports  shall  relate;  otherwise  no 
methodical  provision  can  be  made  for  future  financial  needs, 
and  for  rendering  accounts  of  past  operations.  The  period 
selected  by  practically  all  modern  nations  has  been  a  year.  This 
year,  however,  does  not  necessarily  correspond  with  the  calen- 
dar year.  In  the  United  States  the  financial  year,  or  "fiscal 
year"  as  it  is  technically  called,  runs  from  July  i  to  June  30. 
Strange  as  it  may  appear,  it  was  not  until  1854  that  England 
adopted  a  fiscal  year  to  which  all  of  her  financial  transactions 
should  relate.  Prior  to  that  date  she  had  three  different  finan- 
cial years,  one  for  estimates,  one  for  appropriations,  and  one 
for  accounts.1  By  act  of  that  year  the  period  April  i  to  March 
31  was  made  the  fiscal  year  for  all  purposes.2 

Theory  of  Public  Accounts.  Another  important  feature 
affecting  the  whole  problem  of  public  financing  is  that  of  the 
system  employed  in  keeping  the  government's  books  of  account. 
In  general  a  government  has  to  choose  betwen  two  systems : 
( i )  That  in  which  the  accounts  of  a  year  are  based  upon  the 
principle  of  showing  all  the  resources  accruing  to  the  govern- 
ment, and  setting  up  against  these  resources  all  obligations 
incurred — treating  cash  received  simply  as  collections  of  ac- 
counts or  revenues  receivable,  and  cash  disbursed  as  the  pay- 
ment of  expenses  or  accounts  payable;  and  (2)  that  in  which 
the  accounts  of  a  year  show  only  the  money  actually  paid 
into  or  out  of  the  treasury  during  the  year,  whether  such  pay- 
ments did  or  did  not  pertain  to  that  year.  To  illustrate :  The 
first  system  would  set  up  the  revenues  of  each  year  sepa- 

1  See  Henry  Higgs:   Financial  System  of  the  United  Kingdom,  p.  i. 
'Act  17  and  18  Victl,  c.  94,  s.  2. 

24 


SOME  FUNDAMENTAL  FEATURES 

rately,  and  money  received  on  account  of  taxes  levied  for 
the  year  1914,  but  actually  received  in  1915,  would  be  con- 
sidered as  collections  for  the  fiscal  year  1914;  the  second  sys- 
tem would  consider  all  cash  collected  during  1915  as  belong- 
ing to  that  year.  In  like  manner  money  paid  out  of  the 
treasury  in  1915  to  settle  obligations  incurred  in  1914  would, 
under  the  first  system,  be  considered  as  the  payment  of  the 
liabilities  of  the  year  1914;  under  the  second  system  all  pay- 
ments during  1915  would  be  considered  as  belonging  to  that 
year.  The  first  of  these  two  systems  thus  rests  upon  the  theory 
of  showing  all  revenues  accrued  and  expenses  incurred  for 
each  year  and  the  transactions  pertaining  to  that  year — thereby 
setting  up  assets  and  liabilities  and  an  operation  account;  the 
second  system  rests  upon  the  theory  that  no  information  is 
needed  except  transactions  of  cash,  with  the  balance  at  the 
beginning  and  the  end  of  the  year.  The  first  thus  rests  upon 
an  accrual  basis  and  the  second  upon  a  cash  basis.  The  first 
is  adapted  to  giving  all  the  information  needed  for  the  man- 
agement of  the  whole  estate,  including  the  cash;  the  second 
is  adapted  only  to  treasury  management. 

Each  of  these  systems  has  its  advantages  and  disadvantages.  Advantages 
The  first  is  more  complex,  but  furnishes  all  the  information  vantages*  of 
needed  for  central  control  over  the  entire  management;  the  Each 
second  is  simple,  but  lays  no  basis  for  accurate  comparisons 
of  cost.  Cash  systems  may  be  so  operated  as  to  give  approxi- 
mately accurate  comparisons  of  cost  by  keeping  the  collections 
and  payments  belonging  to  each  year's  accruals  separate.  This 
means  that  the  accounts  of  each  year  are  kept  open  until  all 
the  collections  of  revenues  accrued  and  all  the  payments  of 
liabilities  incurred  during  that  year  have  been  made.  This 
is  the  system  employed  by  France;  ultimately  it  gives  a  close 
approximation  of  revenues  and  cost,  but  the  result  is  long 
delayed.  Other  nations,  such  as  the  United  States  and  Eng- 
land, are  less  exact  in  determination  of  the  years  to  which  the 
cash  transactions  are  to  be  assigned  to  get  at  comparisons 
of  cost.  It  would  take  us  too  far  astray  to  attempt  anything 

25 


BRITISH  FINANCIAL  ADMINISTRATION 


A   Funda- 
mental 
Principle  of 
the  British 
Constitution 


like  a  thorough  discussion  of  this  question  at  this  place.  We 
shall  have  to  content  ourselves  with  the  general  statement 
that,  while  each  gives  the  same  result  in  showing  treasury 
movements  and  conditions,  the  French  system  gives  more  scien- 
tific information  about  the  results  of  management.  It  has 
the  great  disadvantage,  however,  that  under  it  the  accounts 
for  a  year  must  be  kept  open  for  several  years  after  the  year 
to  which  they  relate  has  closed,  and  thus  the  results  are  not 
promptly  available.  By  not  attempting,  through  central  ac- 
counts, to  obtain  this  information,  the  English  and  American 
systems  have  the  technical  advantage  of  permitting  the  books 
to  be  closed  immediately  upon  the  termination  of  the  year, 
and  of  making  final  reports,  such  as  they  are,  to  the  public 
without  delay.1  In  the  United  States  an  attempt  is  made 
to  obtain  the  added  information  on  the  expenditure  side  by 
keeping  the  appropriation  accounts  open  till  a  later  date — 
thereby  enabling  the  central  accounting  officers  to  make  supple- 
mentary statements  later,  from  time  to  time  when  called  for. 

Expenditures  Made  Only  in  Pursuance  of  Appropriations 
by  Parliament.  It  is  a  fundamental  principle  of  the  British 
constitutional  system,  as  it  is  of  the  American  system  and  of 
most  systems  of  nations  having  what  is  termed  "constitu- 
tional" government,  that  no  expenditure  of  public  funds  shall 
be  made  except  in  pursuance  of  express  authorization  there- 
for by  an  elected  representative  body  possessing  the  legis- 
lative power.  It  follows,  therefore,  in  England  that  parlia- 
mentary authority  must  be  found  for  all  expenditures.  This 
authority  is  usually  found  in  annual  or  other  formal  appropria- 
tion acts,  though  it  may  be  contained  in  permanent  statutes. 

It  is  a  remarkable  fact  that,  though  the  idea  of  supreme 
control  over  the  public  purse  by  the  House  of  Commons  was 

1  For  an  excellent  discussion  of  this  subject  see  H.  C.  Adams: 
Science  of  Finance,  pp.  201-211.  See  also  Rene  Stourm:  Le  Budget, 
pp.  11-136.  Prof.  Adams  believes  that,  though  difficult,  it  would  be 
possible  to  employ  a  system  that  would  combine  the  advantages  of 
both  systems. 

26 


SOME  FUNDAMENTAL  FEATURES 

early  established  as  one  of  the  fundamental  principles  of  the 
British  constitutional  system,  no  means  for  making  this  con- 
trol really  effective  were  put  into  execution  until  well  into  the 
nineteenth  century.  The  fact  is  that  it  was  not  until  this 
late  date  that  the  expression,  "control  of  the  public  purse," 
came  to  have  the  meaning  that  it  now  has.  During  all  the 
earlier  period  when  Parliament  was  seeking  to  exert  its  power 
over  the  Crown  in  respect  to  financial  matters,  it  had  in  view 
not  the  direction  of  how  public  moneys  should  be  spent,  but 
the  limitation  of  the  total  amount  that  the  Crown  might  de- 
mand of  the  people  in  the  way  of  taxation  for  governmental 
purposes.  Control  at  this  time  meant  a  control  over  revenues 
and  receipts  rather  than  the  expenditure  side  of  government 
operations.  The  chief  solicitude  of  Parliament  was  the  pro- 
tection of  the  taxpayers.  It  hardly  had  the  conception  of 
taking  to  itself  the  determination  of  the  manner  in  which 
funds,  the  raising  of  which  was  once  authorized,  should  be 
expended.  Discretion  in  respect  to  the  expenditure  of  funds 
was  recognized  as  a  prerogative  of  the  Crown.  It  was  the 
duty  of  the  Crown  to  administer  the  affairs  of  the  country. 
Anything  approaching  the  modern  practice  of  stating  in  de- 
tail how  money  granted  for  the  support  of  the  Government 
should  be  spent  would  have  been  looked  upon,  at  that  time, 
as  an  unwarranted  intrusion  of  the  legislative  branch  into  the 
executive  branch  of  the  Government. 

Only  gradually,  step  by  step,  has  this  principle  been  modified   Evolution  of 
and  the  present  practice  established.    According  to  this  Parlia-   tary  control 
ment   determines  not   only   what  and   how   public  revenues    Complete 
shall  be  obtained  but  how  this  revenue  shall  be  expended. 
Even  now,  as  will  later  appear,  the  most  characteristic  feature 
of  the  appropriation  system  of  Great  Britain  is  the  extent  to 
which  discretion  is  still  left  to  the  Executive  in  respect  to 
the  expenditure  of  the  funds  granted.     Though  Parliament 
still  refrains  from  giving  instructions  in  detail  regarding  ex- 
penditures, it  must  nevertheless  be  recognized  that  the  evo- 
lution from  the  old  to  the  modern  principle  of  control  is  com- 

27 


BRITISH  FINANCIAL  ADMINISTRATION 

plete.  The  old  theory  that  the  function  of  Parliament  ceased 
with  the  determination  of  the  total  amount  of  funds  that 
should  be  placed  in  the  hands  of  the  Crown  for  the  conduct 
of  public  business  has  been  wholly  abandoned.  It  is  now 
universally  recognized  that  the  power  of  Parliament  in  re- 
spect to  expenditures  extends  to  the  determination  in  the 
greatest  possible  detail  of  the  purposes  for  and  manner  in 
which  the  public  money  shall  be  spent.  The  fact  that  it  does 
not  exert  this  power  to  the  full  is  due  simply  to  the  belief 
that  to  do  so  would  be  a  mistake.  It  stops  short  of  this  be- 
cause it  believes  that  the  Crown  is  in  a  better  position  to  de- 
termine these  details  than  itself,  and  that  a  too  minute  specifi- 
cation would  unduly  tie  the  hands  of  the  Executive  and  lead 
to  inefficiency. 

The  Historical  Development  of  the  Present  Appropriation  Sys- 

Poliu ng  tein.  To  understand  present  conditions  it  is  desirable  to  trace, 
at  least  briefly,  the  steps  by  which  this  evolution  of  the  func- 
tion and  power  of  Parliament  in  respect  to  expenditures  has 
been  accomplished.  The  starting  point  in  tracing  this  evo- 
lution is  the  recognition  of  two  things:  (i)  That  at  the  out- 
set there  was  absolutely  no  distinction  between  the  revenues 
of  the  Crown  and  those  of  the  State;  and  (2)  that  at  this 
time  these  revenues  were  only  in  small  part  obtained  from 
taxation  imposed  upon  the  people.  For  the  most  part  the 
public  income  was  derived  from  Crown  lands,  feudal  dues, 
and  the  like.  "The  first  point  that  we  have  to  seize,"  writes 
F.  W.  Maitland,  "in  dealing  with  this  subject  historically  is 
that  in  old  times  the  national  revenue  was  very  really  the  king's 
revenue,  or,  to  put  it  in  another  way,  there  was  no  national 
revenue;  whatever  money  came  to  the  king's  hand  was  his 
to  deal  with  as  he  pleased,  whether  it  consisted  of  the  rents 
of  his  demesne  lands,  or  the  profit  of  the  feudal  tenures,  or 
the  outcome  of  the  aids  or  subsidies  granted  to  him  by  the 
great  council  of  the  nation."1 

1  F.  W.  Maitland :    Constitutional  History  of  England,  p.  430. 

28 


SOME  FUNDAMENTAL  FEATURES 

In  normal  times  this  feudal  income  was  sufficient  to  meet 
the  personal  expenses  of  the  king  and  his  court  and  the  gen- 
eral expenses  of  the  Government.  It  was  only  as  wars  broke 
out  that  need  arose  to  resort  to  taxation.  When  levied,  taxes 
were  deemed  to  be  special  levies  for  the  occasion  only  and 
to  meet  the  special  emergency  then  existing.  "Another  point 
of  importance  is  this,  that  during  the  Middle  Ages  permanent 
taxes  are  very  seldom  imposed.  In  general  a  tax  is  granted 
just  for  this  occasion  only :  The  king  is  granted  a  tenth  of 
movables,  or  a  customs  duty,  or  it  may  be  a  poll  tax  just  to 
meet  the  present  demands  upon  his  resources.  Sometimes 
taxes  are  granted  for  two  or  three  years  to  come,  but  this  is 
rare."  x 

These  two  points  are  significant  from  the  standpoint  of 
parliamentary  control  since,  with  the  development  of  the  two 
principles  that  taxes  were  in  general  levied  not  as  a  general 
source  of  income  but  as  a  means  of  securing  funds  for  a  par- 
ticular purpose,  and  that  no  such  levy  could  be  made  except 
with  the  approval  of  Parliament,  there  naturally  arose  the 
corollary  that  Parliament  should  specify  the  use  to  which 
the  income  derived  from  a  tax  authorized  by  it  should  be  put. 
The  first  form  of  appropriation  was  therefore  that  of  appro- 
priating an  indeterminate  sum,  the  proceeds  of  a  certain  tax, 
to  a  certain  purpose.  Maitland  mentions  as  the  earliest  cases 
where  this  was  done  the  taxes  authorized  in  1348  for  defense 
against  the  Scots  and  in  1353  for  the  prosecution  of  the  war 
then  in  progress. 

This  specification  of  purpose  was  not  always  made,  and,   Limitation 
when  made,  no  adequate  means  existed  for  ensuring  the  stipu-   °uresxper 
lations   so  made   being  carried   out.      Not   until   the   Revo- 
lution in  1688  may  this  principle  of  granting  funds  for  par- 
ticular purposes  be  said  to  have  been  firmly  fixed.    Its  estab- 
lishment grew  out  of  the  contest  between  Parliament  and  the 
Stuarts.    "In  1665  Charles  II  asked  a  very  large  sum  of  money 
for  the  Dutch  war,  and  consented  that  a  clause  should  be 

1  Maitland:    Constitutional  History  of  England,  p.  182. 

29 


BRITISH  FINANCIAL  ADMINISTRATION 


The  Present 
Appropria- 
tion System 


Its  Gradual 
Evolution 


inserted  in  the  act  declaring  that  the  money  raised  under  that 
act  should  be  applicable  only  to  the  purposes  of  the  war.  This 
was  an  important  concession,  and  similar  appropriations  were 
afterwards  made  during  his  reign.  Since  the  Revolution  the 
practice  has,  I  believe,  never  varied;  in  granting  money  to 
the  crown,  parliament  has  appropriated  the  supply  to  particular 
purposes  more  or  less  narrowly  defined."  l 

In  considering  this  statement  of  Prof.  Maitland  we  must, 
however,  bear  in  mind  that  what  was  here  established  was 
something  which  did  not  approach  the  modern  appropriation 
system.  In  the  first  place  the  king  had,  and  continued  to  have 
for  many  years,  a  large  income  which  did  not  come  to  him 
as  the  result  of  a  grant  from  Parliament,  and  over  the  ex- 
penditure of  which  he  consulted  no  will  but  his  own.  In  the 
second  place,  the  appropriation  grants  went  no  farther  than 
to  designate  that  they  were  to  be  devoted  to  certain  large  pur- 
poses, such  as  the  prosecution  of  a  certain  war,  the  main- 
tenance of  an  army,  the  construction  of  a  fleet,  etc.  "The 
great  financial  change  made  at  the  Revolution,"  writes  Lord 
Welby,2  "related  to  the  charge  of  the  Navy  and  the  Army. 
The  Revolution  introduced  annual  Sessions  of  Parliament,  the 
French  war  led  to  annual  Votes  in  Supply  for  Navy  and  Ord- 
nance services,  and  these  Votes  were  formally  sanctioned  by 
Lord  Somers'  Appropriation  clauses.  It  should  be  added,  for 
the  sake  of  accuracy,  that  even  in  the  time  of  William  III.  a 
few  Votes  were  taken  annually  for  services  of  a  civil  charac- 
ter. These  gradually  increased  in  number,  but  they  were 
comparatively  insignificant  in  amount  until  the  latter  part  of 
the  reign  of  George  III.  It  will  be  seen,  then,  that  the  control 
of  Parliament  over  public  expenditure  began  with  the  Revo- 
lution, but  that  that  control  extended  only  to  expenditure  on 
Army,  Navy,  and  Ordnance.  The  reality  of  the  control  was 

1  Maitland:    Constitutional  History  of  England,  p.  433. 

*  Memorandum  on  "The  Control  of  the  House  of  Commons  over 
the  Public  Expenditure."  Report  of  the  Select  Committee  on  Na- 
tional Expenditure  (1902),  Appendix  No.  13,  p.  228. 

30 


SOME  FUNDAMENTAL  FEATURES 

proved  by  the  reduction  of  the  Army  enforced  after  the  Peace 
of  Ryswick  by  the  House  of  Commons  against  the  wishes  of 
the  King.  The  control,  however,  was  limited  in  its  character. 
Estimates  for  the  military  services  were  laid  before  the  House 
of  Commons,  and  upon  these  estimates  the  House  of  Com- 
mons voted  an  amount  for  each  service.  There  was  only  one 
vote  for  the  whole  of  the  Navy  service  until  1798.  In  Anne's 
reign  the  Army  grant  was  divided  into  two  or  three  Votes,  but 
in  both  services  there  grew  up  a  practice  of  expending  large 
sums  without  the  previous  sanction  of  Parliament  on  *ex- 
traordinaries,'  and  a  vote  for  these  extraordinaries  was  sub- 
mitted for  the  sanction  of  the  House  of  Commons  in  a  sub- 
sequent Session.  The  control  exercised  through  the  Votes 
in  supply  was  therefore  imperfect,  and  left  a  great  latitude 
to  the  executive  Government,  of  which  the  Government  did 
not  fail  to  avail  itself." 

Before  anything  like  a  general  appropriation  system,  that  Successive 
is,  one  under  which  Parliament  should  specify  with  reasonable  Develop- 
particularity  how  the  public  revenues  should  be  spent,  two  ment 
reforms  had  to  be  accomplished.  The  first  of  these  was  that 
a  clear  separation  should  be  made  between  the  personal  reve- 
nues and  expenditures  of  the  sovereign  and  those  of  the 
State;  the  second,  that  the  revenues  of  the  State  should  con- 
stitute a  general  fund  from  which  allotment  should  be  made 
to  specific  purposes.  The  first  of  these  was  accomplished 
through  the  creation  of  what  is  known  as  a  "Civil  List,"  the 
second  through  the  establishment  of  the  so-called  "Consoli- 
dated Fund."  Before  proceeding  further,  with  our  historical 
sketch  of  the  development  of  the  present  appropriation  system 
it  is  necessary  therefore  to  say  a  few  words  regarding  the 
circumstances  under  which  these  two  reforms  were  accom- 
plished. 

Separation  of  the  Personal  Revenues  and  Expenditures  of  T.he  civil 
the  Sovereign  and  Those  of  the  State:  The  Civil  List.     As 
has  been  pointed  out,  until  comparatively  modern  times  the 


BRITISH  FINANCIAL  ADMINISTRATION 


Grant  of 

Hereditary 

Excise 


Fixed 

Amount  for 
Support  of 
Crown 


king  was  in  possession  of  important  revenues  not  produced 
through  taxation  and  not,  therefore,  coming  to  him  as  a  grant 
from  Parliament.  Even  after  the  principle  was  established 
that,  as  regards  the  grants  by  it,  Parliament  could  determine 
the  manner  in  which  funds  should  be  expended,  this  income 
remained  at  the  absolute  disposition  of  the  sovereign  to  do 
with  as  he  pleased.  From  this  income,  however,  he  had  to 
defray  not  only  his  own  expenses  and  those  of  his  court  but 
all  of  the  ordinary  expenses  of  government. 

At  the  Restoration  the  amount  of  this  income  was  greatly 
reduced  through  the  abolition  of  many  of  the  heaviest  feudal 
burdens.  To  compensate  the  king  for  this  loss  of  revenue 
there  was  granted  to  him  the  proceeds  of  what  was  known  as 
the  hereditary  excise,  a  special  permanent  tax  upon  beer,  cider, 
spirits,  and  certain  other  articles.  Apart  from  other  features 
this  act  is  of  interest  as  being  the  first  example  of  the  im- 
position of  a  permanent  tax. 

This  arrangement  was  continued  when  William  III  came 
to  the  throne  and,  in  addition,  a  new  tax,  a  tonnage  and  pound- 
age tax,  was  granted  to  him  for  life.  To  this  grant  there 
was,  however,  imposed  an  important  condition.  The  act  sets 
forth  that  it  is  the  intention  of  Parliament  that  the  king  should 
have  an  income  of  £700,000  per  annum  and  that,  should  his 
income  exceed  that  amount,  no  use  should  be  made  by  him 
of  the  excess  without  the  authority  of  Parliament.  This,  says 
Maitland,1  was  the  first  time  that  the  notion  of  a  Civil  List 
appears  on  the  statute  book. 

The  next  step  in  the  evolution  of  the  Civil  List  was  taken 
when  George  III  came  to  the  throne.  On  his  accession  he 
consented  to  give  the  greater  part  of  the  hereditary  revenues 
of  the  Crown  in  return  for  the  grant  to  him  of  a  yearly  sum 
of  £800,000.  In  this  act  a  long  step  was  taken  towards  the 
principle  of  the  revenues  of  the  Crown  being  treated  as  na- 
tional income  and  the  expenses  of  the  Crown  as  expenses 
which  should  be  met  through  grants  from  Parliament.  A 

1  Maitland:    Constitutional  History  of  England,  p.  435. 

32 


SOME  FUNDAMENTAL  FEATURES 

further  step  was  taken  when  George  IV  became  king.  The 
arrangement  made  with  his  predecessor  was  continued,  with 
the  minor  difference  that  the  amount  of  the  grant  was  in- 
creased to  £850,000  per  annum,  and  the  fundamental  differ- 
ence that,  for  the  first  time,  a  distinction  was  made  between 
the  amount  that  should  be  deemed  the  king's  for  his  personal 
use  and  that  which  should  be  devoted  to  the  support  of  the 
Government.  The  former  amount  was  fixed  at  £60,000  per 
annum. 

Slightly  different  arrangements  were  made  with  William 
IV  and  Victoria  when  they  came  to  the  throne,  these  differ- 
ences all  being  in  the  direction  of  drawing  more  clearly  the 
lines  between  the  personal  expenses  of  the  sovereign  and  Gov- 
ernment expenses  proper,  and  in  establishing  the  principle  that 
all  expenditures,  including  those  personal  to  the  sovereign, 
should  find  their  authority  in  a  grant  of  Parliament.  The 
result  is  that  at  the  present  time,  and  one  may  say  since  the 
accession  of  William  IV,  the  sovereign  receives  a  salary  out  A  Royal 
of  which  he  must  pay  all  his  personal  expenses  and  those  of  Budget  ° 
his  family  and  court.  The  total  amount  of  the  Civil  List  at 
the  present  time,  as  set  forth  in  the  "Finance  Accounts"  for 
1913-1914,  is  £470,000,  and  is  made  up  of  the  following  items : 

Their  Majesties'  Privy  Purse.  .......  .£110,000 

Salaries  of  His  Majesty's  Household 

and  Retired  Allowances 125,800 

Expenses  of  His  Majesty's  Household  193,000 

Works i 20,000 

Royal  Bounty,  Alms,  and  Special 

Services  13,200 

Unappropriated  8,000 


Total   £470,000 

This  amount  is  carried  as  a  permanent  continuing  charge 
upon  the  Consolidated  Fund,  the  same  as  the  items  for  the 

33 


An  Essential 
to  the 
British 
System  of 
Control 


BRITISH  FINANCIAL  ADMINISTRATION 

«• 

payment  of  the  interest  on  the  public  debt,  the  salaries  of 
judges,  etc.1 

The  Consolidated  Fund.  In  making  a  clear  distinction  be- 
tween the  possessions  of  the  sovereign  and  those  of  the  na- 
tion, Parliament  laid  one  of  the  foundation  stones  upon  which 
to  rest  the  structure  of  real  legislative  control  over  national 
income  and  expenditure.  A  second  stone  was  laid  in  1787 
by  the  establishment  of  the  principle  that  there  should  be  one 
general  fund  into  which  all  the  revenues  of  the  crown  should 
be  paid  and  from  which  all  public  disbursement  should  be 
issued. 

"In  1785  [writes  Mr.  Henry  Higgs]  2  the  Commis- 
sioners of  Public  Accounts  called  attention  to  the  in- 
tricacy of  the  system  under  which  various  public  charges 
were  earmarked  against  particular  sources  of  revenue. 
Thus,  for  example,  no  fewer  than  seventy-four  charges 
involving  seventy- four  separate  accounts  were  imposed 
upon  the  Customs  revenue,  the  Militia  charges  were  de- 
frayed from  the  Land  tax,  and  certain  hereditary  annui- 
ties were  met  out  of  the  Post  Office  revenue.  To  sweep 
away  such  complications  the  Commissioners  recom- 
mended that  there  should  be  formed  'one  Fund  into 
which  shall  flow  every  stream  of  the  public  revenue  and 

1  Higgs  in  his  "Financial  System  of  the  United  Kingdom,"  p.  54, 
quotes  the  following  interesting  passage  from  Macaulay's  "History  of 
England,"  Chap,  xv,  regarding  the  use  of  the  term  "Civil  List" :  "The 
expenses  of  the  Royal  Household  are  now  entirely  separated  from 
the  expenses  of  civil  government ;  but,  by  a  whimsical  perversion,  the 
name  of  Civil  List  has  remained  attached  to  that  portion  of  the  revenue 
which  is  appropriated  to  the  expenses  of  the  Royal  Household.    It  is 
still   more   strange   that   several   neighbouring  nations   should   have 
thought  this  most  unmeaning  of  all  names  worth  borrowing."     The 
historical  justification  for  the  English  use  of  the  term  is,  as  we  have 
seen,  that  in  early  days  civil  expenses  were  a  charge  upon  the  rev- 
enues of  the  Crown,  military  being  largely  met  from  grants  by  Parlia- 
ment. 

2  Henry  Higgs :   Op.  cit.,  p.  18. 

34 


SOME  FUNDAMENTAL  FEATURES 
from   whence   shall   issue   the   supply   for  every   public 


This  recommendation  of  the  Commissioners  of  Public  Ac- 
counts was  approved  by  Parliament.  By  the  so-called  Con- 
solidated Fund  Act  of  1787,*  provision  was  made  that  there 
should  be  established  a  single  fund,  to  be  known  as  the  Con- 
solidated Fund,  into  which  all  public  revenues  should  be  paid, 
and  out  of  which  all  public  expenditures  should  be  met.  A 
similar  measure  in  reference  to  the  revenues  and  expenditures 
of  Ireland  was  enacted  in  1816  and  the  two  Consolidated 
Funds  were  further  consolidated  into  one  Consolidated  Fund 
of  Great  Britain  and  Ireland.2 

It  is  difficult  to  overvalue  the  importance  of  this  action.  It 
constitutes  one  of  the  greatest  measures  of  financial  reform  Consolidated 
accomplished  by  Parliament  up  to  that  time.  As  long  as  the 
system  of  assigning  particular  receipts  to  particular  purposes 
prevailed,  it  was  manifestly  impossible  for  Parliament  to  ex- 
ercise any  close  control  over  the  administration  of  the  pub- 
lic finances.  Certainly  it  was  impossible  to  secure  that  annual 
consolidated  statement  of  public  revenue  and  expenditure,  in 
connection  with  an  estimate  of  future  needs,  which  is  the 
foundation  upon  which  any  proper  budgetary  system  must 
rest. 

In  view  of  the  manifest  advantages  of  this  system  it  is  diffi- 
cult to  understand  why  England,  having  once  adopted  it, 
should  afterwards  depart  from  it.  As  will  hereafter  be  pointed 
out,  Parliament  has  directed  that  certain  receipts  of  the  Gov- 
ernment shall  not  be  carried  into  the  Consolidated  Fund,  but 
shall  be  used  directly  by  the  services  collecting  them  in  the  way 
of  "appropriations  in  aid"  for  meeting  their  expenses.  This 
is  a  matter  which  will  be  considered  at  some  length  when  the 
subject  of  estimates  and  appropriations  is  taken  up  for  special 
consideration.  We  only  mention  it  here  as  a  procedure  which 

1 27  Geo.  Ill,  chap.  13. 

"Maitland:    Constitutional  History  of  England,  p.  441. 

35 


seems  to  be  an  unfortunate  departure  from  a  sound  principle 
of  public  finance. 

The  Exchequer.  The  term  "Consolidated  Fund"  is  em- 
ployed to  describe  the  general  fund  into  which,  with  the  ex- 
ception that  has  been  noted,  all  public  revenues  are  paid  and 
out  of  which  all  public  expenditures  are  met.  This  fund 
stands  to  the  credit  of  the  "Exchequer,"  the  latter  being  the 
term  employed  to  designate  the  public  treasury.  The  cus- 
todians of  this  account  are  now  the  Bank  of  England  and 
the  Bank  of  Ireland.  The  origin  of  the  term  "Exchequer" 
and  the  early  system  employed  for  the  custody  and  control 
of  public  funds  is  interestingly  told  by  Mr.  Thomas  Gibson 
Bowles,  a  member  of  Parliament  and  a  high  authority  upon 
matters  of  public  finances,  in  his  testimony  before  the  Select 
Committee  on  National  Expenditure  (I9O2).1 

Origin  "As  to  the  origin  of  the  present  system,  of  course  an 

Exchequer  Exchequer — that  is  to  say,  a  place  for  keeping  the  King's 

cash — has  always  existed  in  this  country  from  the  very 
earliest  times.  But  the  Exchequer  properly  so  called  had 
its  name  brought  over  for  it  from  Normandy  with  the 
Conquest,  and  I  believe  the  name  is  derived  from  the 
checkered  cloth  upon  the  table  of  the  place  where  the 
cash  was  kept  which  was  used  in  order  to  facilitate  cal- 
culations. The  Exchequer,  then,  is  the  place  where  the 
King's  Revenue  was  received,  where  it  was  kept,  super- 
vised and  controlled,  and  from  whence  it  was  issued.  It 
was  kept  there  and  managed  there.  It  was  at  first  the 
actual  coin  that  was  received  there  by  tale  and  weight. 
There  were  three  officers  of  Exchequer,  each  of  whom 
had  a  control  over  the  issue  of  the  money,  for  the  money 
was  kept  in  chests,  each  chest  having  three  locks  and  each 
of  those  officers  having  his  key  to  one  of  the  locks.  One 
of  those  officers  was  called  the  Teller,  who  was  the  cash- 
Report  (1902),  p.  63. 

36 


SOME  FUNDAMENTAL  FEATURES 

ier  who  received  and  issued  the  money;  then  there  was 
the  Clerk  of  the  Pells,  who  recorded  on  a  pell  or  parch- 
ment all  receipts  and  issues ;  and  then  there  was  the  audi- 
tor, who  examined  the  records,  and  whose  duty  it  was  to 
see  that  no  money  was  issued  except  in  accordance  with 
law,  and  with  the  sanction  of  Parliament." 

This  was  the  system  that  existed  until  well  into  the  nine- 
teenth century,  though  certain  changes  were  of  course  made 
in  respect  to  the  actual  custody  of  the  cash.  In  1834  the 
whole  system  for  the  administration  of  the  public  finances  Changes 
was  thoroughly  overhauled.  One  of  the  reforms  thus  accom- 
plished  was  the  provision  that  thereafter  all  public  revenues 
should  be  paid  into  the  Banks  of  England  and  Ireland  to 
the  credit  of  the  Exchequer  account,  that  is,  to  the  Consoli- 
dated Fund.  As  there  is  no  separate  Exchequer  account  in 
Scotland,  the  duty  of  receiving  public  moneys  and  paying 
them  over  to  the  Bank  of  England  is  performed  by  the  six 
Scotch  banks  in  rotation  of  a  year  each.  The  term  "Ex- 
chequer" as  one  to  designate  the  national  treasury  is  retained, 
the  Bank  of  England  and  the  Bank  of  Ireland  being  merely 
substituted  as  the  strong  box  for  the  keeping  of  the  public 
treasure.  The  Bank  of  England  and  the  Bank  of  Ireland,  it 
should  be  noted,  are  mere  bankers  of  the  Government.  Their 
duty  is  confined  to  that  of  receiving  the  public  revenue  and 
paying  it  out  to  officers  who  are  charged  with  the  actual  re- 
sponsibility of  settling  and  paying  public  obligations.  They 
take  the  place  of  the  Teller  under  the  old  cashbox  sys- 
tem. 

The  Collection  and  Expenditure  of  Funds  Authorized 
by  Parliament  only  upon  the  Request  or  Approval  of 
the  Crown.  We  have  seen  that  the  principle  is  now  firmly 
established  that  no  burden  in  the  way  of  taxation  or  other- 
wise shall  be  imposed  upon  the  people  and  no  expendi- 
ture of  public  funds  shall  be  made  until  Parliament  has  given 

37 


BRITISH  FINANCIAL  ADMINISTRATION 


Location  of 
Executive 
Responsi- 
bility 


The  Rule 

Rigidly 

Enforced 


its  express  sanction  therefor.  No  feature  in  the  whole  con- 
stitutional history  of  England  is  more  noteworthy  than  the 
fact  that  the  House  of  Commons,  while  steadily  insisting 
upon  the  establishment  and  maintenance  of  this  principle,  has 
at  no  time  sought  to  make  of  itself  the  organ  through  which 
the  financial  program  of  the  Government,  either  as  regards 
receipts  or  expenditures,  should  be  formulated.  From  the 
beginning  it  has  interpreted  its  function  as  that  of  passing 
upon  proposals  emanating  from  the  Crown.  It  was  the  duty 
of  the  Crown  to  declare  what  were  the  financial  needs  of  the 
nation  and  how  these  needs  should  be  met;  the  duty  of  the 
House  of  Commons  lay  in  the  approval  or  disapproval  of  the 
plans  as  laid  before  it. 

This  rule  is  rigidly  enforced.  It  applies  not  only  to  the 
annual  finance  and  appropriation  acts  by  which  the  collection 
of  taxes  is  authorized  and  the  grant  of  funds  made,  but  to 
all  cases  where  money  is  required  for  any  purpose.  It  pro- 
hibits the  introduction,  or  at  least  consideration,  of  any  bill 
or  resolution  the  provisions  of  which,  if  enacted,  will  impose 
a  charge  upon  the  public  treasury,  until  the  approval  of  the 
Crown,  expressed  through  one  of  the  ministers,  has  first  been 
received.  Furthermore,  it  rules  out  any  amendment  to  a 
proposal  submitted  by  the  Crown  having  for  its  purpose  the 
increase  of  the  sums  asked  for  by  the  latter.1 

The  rules  governing  this  matter  are  now  found  in  Standing 
Orders  Nos.  66  and  68  of  the  House  of  Commons,  both  of 
which  date  from  the  beginning  of  the  eighteenth  century, 

1To  this  statement  that  the  initiation  for  all  expenditures  must 
come  from  the  Crown  there  is  one  exception.  Occasionally  a  case 
presents  itself  where  it  is  desired  to  make  a  special  appropriation  for 
a  particular  object,  such  as  the  erection  of  a  monument  to  a  dis- 
tinguished person,  or  the  grant  of  a  sum  of  money  to  one  who  has 
rendered  some  great  service  to  the  nation,  and  it  is  deemed  more 
appropriate  that  the  proposal  to  make  such  an  expenditure  should 
come  from  the  House.  In  these  cases  the  House  passes  what  is 
known  as  an  Address  to  the  Crown  asking  that  the  grant  be  made 
and  stating  that  "this  House  will  make  good  the  same."  All  such 
sums  must,  however,  be  formally  voted  in  committee  as  all  other 
appropriations. 

38 


SOME  FUNDAMENTAL  FEATURES 

though  their  wording  may  have  undergone  some  slight  altera- 
tion.   Their  present  wording  is  as  follows: 

"66.     This  house  will  receive  no  petition  for  any  sum   Standing 

.      .  ...  .  Orders 

relating  to  public  service,  or  proceed  upon  any  motion 
for  a  grant  or  charge  upon  the  public  revenue,  whether 
payable  out  of  the  consolidated  fund  or  out  of  money  to 
be  provided  by  parliament,  unless  recommended  from 
the  Crown." 

"68.  This  house  will  not  receive  any  petition  for 
compounding  any  sum  of  money  owing  to  the  Crown, 
upon  any  branch  of  the  revenue,  without  a  certificate 
from  the  proper  officer  or  officers  annexed  to  the  said 
petition,  stating  the  debt,  what  prosecutions  have  been 
made  for  the  recovery  of  such  debt,  and  setting  forth 
how  much  the  petitioner  and  his  security  are  able  to  sat- 
isfy thereof." 

It  is  hardly  necessary  for  us  to  point  out  the  overwhelming 
importance  of  the  principles  embodied  in  these  rules  as  a 
means  of  preventing  ill-advised  and  wasteful  expenditure  of 
public  funds.  At  one  stroke  it  renders  impossible  the  enor- 
mous abuses  which  prevail  in  the  United  States  arising  from 
the  right  possessed  by  individual  members  of  Congress  to 
propose  and  secure  the  consideration  of  measures  calling  for 
an  appropriation  of  public  funds.  The  exercise  of  that  right, 
in  conjunction  with  the  device  of  "log-rolling,"  has  not  only 
given  rise  to  the  recurrent  scandals  of  the  "pork-barrel"  pub- 
lic buildings  and  river  and  harbor  bills,  but  has  destroyed  all 
possibility  of  framing  and  adopting  a  consistent  and  effective 
scheme  or  program  of  public  expenditures.  Under  the  British 
system  each  demand  for  funds  -  originates  with  the  head  of 
the  service  for  which  the  funds  are  requested,  and  thus  repre- 
sents the  judgment  of  the  person  most  competent  to  deter- 
mine the  real  needs  of  the  service.  Under  the  American  sys- 
tem demands  for  funds  may,  and  often  do,  originate  with 

39 


BRITISH  FINANCIAL  ADMINISTRATION 

individual  members  of  Congress  having  little,  and,  at  best, 
inadequate,  knowledge  of  the  needs  of  the  services  for  which 
they  are  intended.  What  is  worse,  they  have  no  direct  interest 
in  the  efficient  and  economical  administration  of  such  services. 
Their  interest  is  in  the  localities  to  be  served,  which  interest 
may  be  diametrically  opposed  to  the  interest  of  the  services 
and  of  the  public  as  a  whole.  In  many  cases  money  is  ap- 
propriated in  pursuance  of  proposals  thus  initiated,  not- 
withstanding the  fact  that  the  heads  of  the  services  affected 
protest  vigorously  that  they  have  no  need  for  such  money  or 
for  the  services  to  be  furnished  by  such  funds. 

Contrast  Under  the  British  system  responsibility  is  definitely  located 

American  with  an  officer  who  can  be,  and  is,  held  to  a  rigid  account  of 
the  manner  in  which  the  funds  asked  for  are  expended.  Un- 
der the  American  system  the  enforcement  of  any  effective 
system  of  securing  responsibility  and  accountability  is  im- 
possible. This  is  an  old  story  and  the  commission  will  not 
dwell  upon  it  further.  It  would  not  have  been  proper,  how- 
ever, to  have  omitted  making  at  least  this  brief  mention  of 
the  great  advantages,  both  theoretical  and  practical,  which 
the  British  system  has  over  the  American  system. 

Distinction  Bet-ween  Permanent  and  Annual  Appropriations. 
To  every  government  there  is  presented  the  problem  of  deter- 
mining the  extent  to  which  it  is  desirable  that  the  revenue 
to  be  raised  and  the  expenditures  to  be  authorized  shall  be 
determined  by  general  statutes  continuing  in  force  until  modi- 
fied or  repealed,  or  shall  be  a  matter  to  be  annually  consid- 
Executive       ered  and  acted  upon  by  the  fund-raising  and  granting  author- 
ParTiamVnt     ^7-    Theoretically  the  principle  of  parliamentary  control  ren- 
and  ^ers  it:  Desirable  that  eacl1  vear  Parliament  should  make  a  gen- 
eral examination  of  all  the  financial  resources  and  needs  of  the 
Government  and  decide  upon  a  revenue  and  expenditure  pro- 
gram for  the  year  to  ensue.     To  the  theoretical  advantages 
of  this  principle  there  are,  however,  certain  practical  objec- 
tions.   From  the  revenue  side  there  are  obvious  disadvantages 

40 


SOME  FUNDAMENTAL  FEATURES 

in  constantly  modifying  the  taxation  system  or  even  in  rais- 
ing the  question  of  its  modification.  From  the  expenditure 
side  there  are  certain  obligations  of  the  Government  which, 
for  reasons  that  will  be  stated,  it  is  undesirable  to  submit 
to  the  hazards  of  an  annual  determination.  The  most  im- 
portant of  these  obligations  are  those  in  respect  to  the  meet- 
ing of  which  the  public  faith  has  been  pledged.  Of  this  char- 
acter are  the  interest  on  the  public  debt  and  payments  on  ac- 
count of  annuities,  pensions,  etc.  Another  class  of  obligations 
falling  in  this  category  is  that  represented  by  judicial  salaries. 
Here  the  motive  for  making  the  authorization  of  the  pay- 
ment a  permanent  and  continuing  one  is  that  of  giving  the 
judges  greater  independence  of  legislative  and  executive  in- 
fluence than  they  would  have  if  their  salaries  had  to  be  voted 
each  year.  Finally,  there  is  something  to  be  said  in  favor 
of  adopting,  as  regards  certain  expenditures,  a  program 
that  will  extend  over  a  considerable  period  of  time,  and 
also  of  relieving  the  legislature  from  the  consideration 
of  matters  regarding  which  there  is  little  or  no  oppor- 
tunity for  difference  of  opinion  in  respect  to  the  action 
to  be  taken. 

In  the  United  States  this  difference  between  appropria- 
tions which  should  be  voted  specially  or  annually  and  those 
which  should  be  provided  for  by  general  statute  is  clearly 
recognized  by  the  distinction  which  is  made  between  perma- 
nent or  continuing  appropriations  and  annual  appropriations. 
In  England  the  same  distinction  is  made,  but  the  terms  em-  Distinction 

.  ,.-.  .  Between 

ployed  to  designate  the  two  are   different.     Appropriations  Continuing 
falling  under  the  first  head  are  termed  "Consolidated  Fund  and  Annual 

Appropna- 

Services,"  and  those  falling  under  the  second  head  "Supply  tions 
Services."  This  distinction  is  of  prime  importance,  for  it 
must  be  remembered  that  in  all  the  discussion  that  follows  as 
to  the  manner  in  which  estimates  are  prepared,  submitted, 
and  acted  upon,  reference  is  had  solely  to  the  supply  serv- 
ices. This  means  that  the  documents  relating  to  these  trans- 
actions, the  estimates  themselves,  the  memoranda  and  com- 

41 


BRITISH  FINANCIAL  ADMINISTRATION 


parative  tables  accompanying  them,  and  the  "appropriation 
accounts"  submitted  to  the  House  by  the  Comptroller  and 
Auditor  General  giving  audited  expenditures,  do  not  make 
a  complete  presentation  of  estimates  or  expenditures  for  all 
the  expenses  of  government,  but  only  for  those  covered  by 
the  Supply  Services.  This  being  so,  it  is  important  to  de- 
termine the  principles  upon  which  this  classification  is  based 
and  the  character  of  the  items  that  are  assigned  to  each  class. 

Consolidated  Fund  Services.  It  has  been  pointed  out  that 
the  principle  of  parliamentary  control  over  expenditures  de- 
mands that  the  general  rule  be  that  provision  shall  be  made 
annually  for  the  needs  of  the  ensuing  year  and  that  all  de- 
partures from  this  rule  shall  be  in  the  nature  of  exceptions 
for  which  an  adequate  justification  shall  exist.  It  is  a  mat- 
What  Ap-  ter  of  importance,  therefore,  to  determine  the  manner  in 
Ar°Pinclu°ded  which  this  rule  has,  in  practice,  been  carried  out  in  the  Brit- 
ish system.  The  following  table,  taken  from  the  "Finance 
Accounts"  for  the  year  1913-1914,  gives  a  recapitulation  of 
the  items  covered  by  the  Consolidated  Fund  Services : 


Receipts 

£        s.        d. 

£        s.        d. 

National  Debt  Services  

24  500  ooo 

Funded  Debt: 
Interest  

l4..787.lo8-l6-2 

Terminable  Annuities  

3,2O2,O26—I2—5 

Unfunded  Debt: 
Interest  

1,11^.84.0-18-7 

Management  of  the  Debt  

I66.52Q—  IQ—  Q 

New  Sinking  Fund  

5.228.4.84.-I  "*-! 

Road  Improvement  Fund  

I  3Q4.  O^I 

Payments   to    Local    Taxation   Ac- 
counts, etc  

971/1  T27—  TO—  f\ 

Other  Consolidated  Fund  Services.  . 
Civil  List  

4.7O.OOO 

*>(>93,  890-6-10 

Annuities  and  Pensions  

^16.575—  iv-  6 

Salaries  and  Allowances  

S6.S4-7—  2—1 

Courts  of  Justice  

5^,O42—  7—^ 

Miscellaneous  Services  

^I7.72S—  4.—  O 

TOTAL  £ 

37  322  Q68—  17—  A. 

42 


SOME  FUNDAMENTAL  FEATURES 

The  total  issues  from  the  Exchequer  during  the  year  were  Continuing 
£239>752>763-5-io.     It  will  thus  be  seen  that  the  Consoli-  p^adons 
dated  Fund  Services  represented  approximately  one-sixth  of 
the  total  issues,  the  remaining  five-sixths  being  accounted  for 
by  the  Supply  Services. 

The  foregoing  table  is  supported  by  other  tables  in  the 
report  in  which  are  given  the  details  of  the  items  entering 
into  these  tables.  If  consultation  of  these  tables  is  had  it 
will  appear  that  no  consistent  principle  has  been  followed  by 
England  in  determining  what  items  of  expense  shall  be  treated 
as  Consolidated  Fund  Services  and  what  as  Supply  Services. 
To  bring  out  the  inconsistencies  that  are  here  presented  we  inconsisten- 

cics  of 

cannot  do  better  than  quote  the  comments  of  Mr.  Harold  Cox  practice 
as  contained  in  an  article  entitled  "The  Magnificent  Muddle 
of  Department  Finance,"  published  in  1908  and  republished 
in  1913  as  a  chapter  in  a  book  dealing  with  the  general  prob- 
lem of  the  financial  administration  of  Great  Britain.1 

After  giving  a  table  showing  in  some  detail  the  items  con-  Criticism  by 

,-,  ,.  -,-,       ,  r,        .  .  Englishman 

stitutmg  the  Consolidated  Fund  Services,  he  writes : 

"This  somewhat  lengthy  table  which  has  been  sum- 
marised from  the  fuller  details  given  in  the  Finance  Ac- 
counts, will  help  to  show  the  reader  how  needlessly  com- 
plicated are  the  national  accounts.  Take,  for  example, 
the  item  of  £16,244  for  Public  Offices.  This  is  an  an- 
nuity created  under  an  Act  of  1882  to  pay  for  the  sites 
of  certain  public  offices.  It  is  charged  upon  the  Consol- 
idated Fund,  and  buried  out  of  sight  under  the  head  of 
'Miscellaneous  Services';  but  exactly  similar  annuities 
created  by  other  acts  are  charged  upon  the  Estimates  of 
the  Office  of  Works,  where  their  presence  helps  to  show 
what  is  the  actual  cost  to  the  country  of  its  public  offices. 

"Equally  unsatisfactory,  from  the  point  of  view  of 
intelligible  account-keeping,  is  the  item  of  £21,000  for 

1  Official  Finance  in  Government  Departments:  A  Series  of  Crit- 
ical Comments  upon  the  Business  and  Financial  Methods  of  Govern- 
ment Departments.  Financial  Rev.  of  Reviews,  p.  43.  London  (1913). 

43 


BRITISH  FINANCIAL  ADMINISTRATION 

Queen's  Colleges,  Ireland.  These  same  colleges  also  ap- 
pear in  the  Civil  Service  Estimates  under  the  vote  for 
education  in  Ireland,  and  receive  a  further  grant  which 
in  the  present  year  will  be  £4,700.  To  pass  to  larger 
items,  we  find  two  sums,  namely,  £40,000  and  £728,000, 
granted  to  Ireland  under  the  authority  of  Acts  of  Parlia- 
ment passed  in  1891  and  1898.  As  regards  both  these 
grants,  if  we  turn  to  the  Civil  Service  Estimates  we  find 
other  sums  for  identical  or  similar  services.  Thus,  in 
addition  to  the  £40,000  in  the  above  table  permanently 
granted  to  Ireland  for  Land  Purchase,  the  taxpayer  has 
to  provide  under  Class  III  of  the  Civil  Service  Estimates 
£271,000  in  the  current  year  for  the  cost  of  the  Irish 
Land  Commission,  which  administers  the  Land  Purchase 
Act.  A  further  charge  of  £12,000  appears  in  the  Con- 
solidated Fund  accounts,  as  the  above  table  shows,  for 
the  salaries  of  the  Land  Commission  Judges.  It  is  an 
elementary  principle  of  sound  account-keeping  that  the 
expenses  of  each  service  should  be  brought  together,  so 
that  those  who  have  a  right  to  be  interested  in  the  ex- 
penditure may  see  what  the  full  cost  of  the  service  is. 
Yet  the  cost  of  the  system  of  land  purchase  in  Ireland 
appears  under  three  separate  heads,  which  are  in  no  way 
connected  with  one  another. 

"A  similar  criticism  applies  to  the  agricultural  grant  of 
£728,000  a  year  to  Ireland.  In  addition  to  this  grant 
permanently  charged  upon  the  Consolidated  Fund,  the 
annual  Estimates  show  a  charge  in  the  current  year  of 
£216,000  for  the  Department  of  Agriculture  and  Tech- 
nical Instruction. 

"As  a  last  example  take  the  payment  of  £215,000  to 
the  Indian  Army  Pension  Deficiency  Fund.  This  is 
really  an  army  charge.  It  represents  part  of  the  cost  of 
maintaining  the  military  machine,  and  ought  therefore 
to  appear,  not  on  the  Consolidated  Fund  Accounts,  but 
on  the  army  estimates. 

44 


SOME  FUNDAMENTAL  FEATURES 

"These  examples  are  sufficient  to  show  that  the  Esti- 
mates alone  give  an  inadequate  representation  of  the  pub- 
lic expenditure.  Yet,  as  already  explained,  they  contain 
the  only  figures  which  require  the  annual  sanction  of  the 
House  of  Commons.  The  charges  upon  the  Consolidated 
Fund  annually  falling  due  are  not  even  published  until 
after  they  are  paid." 

To  the  commission  it  would  seem  impossible  to  deny  the 
justice  of  the  criticism  here  made.  It  is  not  merely  that  there  the  Way  of 
is  a  failure  to  adopt  and  rigidly  adhere  to  some  consistent 
principle,  but  that  great  difficulties  are  thrown  in  the  way 
of  Parliament  and  the  public  determining  the  total  expendi- 
tures entailed  in  the  conduct  of  certain  operations  or  of  cer- 
tain services  of  the  Government.  Consideration  of  the  ex- 
penditures of  the  Government  takes  place  upon  the  estimates 
submitted  for  the  Supply  Services.  One  naturally  expects  that 
if  in  such  estimates  items  for  particular  purposes  appear,  that 
such  items  cover  all  the  expenditures  in  connection  with  such 
purposes.  That  they  do  not  do  this  and  that  certain  expendi- 
tures of  precisely  the  same  character  are  provided  for  under 
the  Consolidated  Fund  Services  means  that  to  that  extent  dis- 
cussion takes  place  upon  incorrect  data.  The  evil  is  so  ob- 
vious and  the  remedy  so  easy  that  it  is  difficult  to  understand 
why,  in  a  system  which  in  other  respects  is  so  excellent,  a 
defect  of  this  character  should  be  allowed  to  continue. 

Supply  Services.  As  has  been  pointed  out  in  our  considera- 
tion of  Consolidated  Fund  Services,  this  term  is  used  to  cover 
all  expenditures  not  provided  for  as  a  permanent  continuing 
charge  upon  the  Consolidated  Fund.  Their  distinctive  char- 
acteristic, as  regards  the  procedure  employed  in  providing 
for  them,  is  that  they  must  be  voted  annually  in  pursuance  of 
estimates  laid  before  Parliament.  It  should  be  noted,  how- 
ever, that,  when  voted,  they  are  paid  out  of  the  Consolidated 
Fund  no  less  than  those  constituting  a  permanent  charge  upon 

45 


BRITISH  FINANCIAL  ADMINISTRATION 

Distinguish-  that  fund.  It  is  with  this  class  of  expenditures  that  the 
student  of  methods  of  financial  administration  is  chiefly  con- 
cerned. In  the  chapters  that  follow  it  will  therefore  be  our 
aim  to  describe  in  detail  the  procedure  employed  in  handling 
them. 


CHAPTER  III 

THE  ESTIMATES:     PREPARATION  AND 
SUBMISSION 

Appropriations  Made  Only  in  Pursuance  of  Formal  Estimates;  Esti- 
mates the  Act  of  the  Ministry  As  a  Whole;  The  Treasury  the 
Authority  for  the  Preparation  and  Submission  of  the  Estimates; 
Special  Procedure  for  the  Army  and  Navy  Estimates;  Treasury 
Estimates  Circular;  Estimates  as  Submitted  by  the  Several  Depart- 
ments to  the  Treasury  in  Large  Part  but  a  Summation  of  Provi- 
sions Already  Approved  by  the  Treasury;  Comparative  and  Ex- 
planatory Data  Required ;  Estimates  to  Be  Justified  Though  No  In- 
crease Is  Requested;  Preparation  of  Estimates  Within  the  Depart- 
ments; Examination  of  the  Estimates  by  the  Treasury;  Transmis- 
sion of  the  Estimates  to  the  House  of  Commons;  Supplementary 
Estimates. 

As  set  forth  in  our  analysis  of  the  problem  of  financial 
administration,  the  point  from  which  a  consideration  of  the 
several  links  in  the  continuous  chain  of  operations  can  best 
be  inaugurated  is  that  of  the  preparation  by  the  Executive  of 
its  estimates  of  the  financial  needs  of  the  government  for  the 
year  to  ensue.  It  is  with  this  operation,  therefore,  that  we 
will  begin  our  study  of  the  details  of  the  British  financial 
procedure. 

Appropriations  Made  Only  in  Pursuance  of  Formal  Esti- 
mates.   The  requirement  that  no  proposal  for  the  expenditure 
of  money  shall  be  considered  that  does  not  have  the  sanction 
of  the  Crown  is  the  statement  of  a  general  principle.     It  is 
not  sufficient,  however,  for  a  government  to  adopt  a  princi- 
ple :     Appropriate  means  must  be  provided  for  carrying  this  Means 
principle  into  effect.     In  the  present  case  this  means  is  found  carry 
in  the  rule  which  requires  that  all  requests  for  funds  emanat-  Principle 
ing  from  the  Executive  must  take  the  form  of  a  formal  "esti-  Effect 

47 


BRITISH  FINANCIAL  ADMINISTRATION 

mate"  submitted  by  it  to  the  House  of  Commons.  It  thus 
follows  that  every  appropriation  must  have  back  of  it,  and 
must  rest  upon,  an  "estimate."  This  applies  not  merely  to 
the  annual  demand  for  funds  for  the  operation  of  the  Gov- 
ernment during  the  fiscal  year  to  which  it  relates,  but  to  all 
requests  for  funds,  no  matter  how  casual  they  may  be.  If, 
therefore,  need  for  money  for  a  certain  purpose  suddenly 
arises,  the  only  method  by  which  the  money  may  be  obtained 
is  by  the  Ministry,  acting  through  the  appropriate  minister, 
laying  before  the  House  of  Commons  an  estimate  for  the 
funds  needed.  In  considering  this  subject  of  estimates  it 
is  thus  important  to  keep  in  mind  that  this  term  connotes 
two  things:  (i)  A  careful  calculation  of  the  amount  of 
money  needed  for  a  designated  purpose;  and  (2)  a  formal 
document  emanating  from  the  Executive  and  constituting  a 
formulated  demand  upon  Parliament  that  the  sum  estimated 
for  be  granted  to  the  Crown  for  the  purpose  specified.1 

Estimates  the  Act  of  the  Ministry  as  a  Whole.  A  further 
cardinal  principle  of  the  English  financial  system  is  that  these 
estimates  are  not  submitted  by  the  individual  departments 
for  whose  use  the  money  is  intended,  but  must  pass  through, 
and  receive  the  approval  of,  and,  with  the  exception  of  the 
estimates  for  the  Army  and  Navy,  be  actually  submitted  by 
the  Treasury.2  The  result  of  this  procedure  is  that,  both 
in  theory  and  in  fact,  the  request  for  funds  is  one  emanating 
from  the  Executive  as  a  whole.  This  is  not  a  mere  formal  re- 
of  Scutive  <luirement-  It  means  that  all  requests  for  funds  will  be  care- 
Responsi-  fully  scrutinized  by  an  authority  other  than  the  one  for  whose 
use  the  funds  are  intended,  before  any  formal  demand  for 
this  grant  will  be  made.  When  made,  it  becomes  the  act  of 
a  ministry  which  is  responsible  for  the  whole  financial  plan. 

1  The  request  for  funds,  under  English  practice,  for  historic  reasons, 
takes  the  form  of  a  demand. 

2  For  all  estimates,  except  the  Army  and  Navy,  the  Treasury  is  the 
agent  of  the  Ministry.     The  Army  and  Navy  estimates  are  handled 
direct. 

48 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

This  is  a  feature  regarding  which  we  shall  have  much  to  say 
in  another  place,  where  the  function  of  the  Treasury  as  an 
agent  for  controlling  expenditure  is  more  directly  considered. 

The  Treasury  the  Authority  for  the  Preparation  and  Sub-  The 
mission  to  Parliament  of  the  Estimates.  We  have  just  pointed  AgentUof  *' 
out  that  requests  for  grants  of  funds  represent  the  act  of  the  Ministry 
the  Ministry  as  a  whole.  This  is  secured  by  the  rule  that 
no  request  for  funds  shall  be  made  upon  Parliament  until 
such  request  has  received  the  approval  of  the  Treasury.  Fur- 
thermore, all  these  requests,  i.  e.,  the  estimates,  with  the  ex- 
ception of  those  for  the  Army  and  Navy,  are  presented  to  Par- 
liament by  the  Treasury.  This  exception  in  the  case  of  the 
Army  and  Navy  is  merely  one  of  form,  since  these  estimates 
must  be  passed  upon  and  the  presentation  authorized  by  the 
Treasury.  In  performing  this  function  the  Treasury  by  no 
means  acts  merely  as  a  ministerial  agent  of  Parliament  for 
the  assembling  of  the  estimates  and  their  presentation  to  the 
representative  body.  It  is  the  authority  which  upon  informa- 
tion obtained  from  administrative  departments  actually  frames 
the  estimates  and  determines  what  funds  shall  be  asked  for. 
The  "Estimates,"  in  a  word,  is  the  estimates  of  the  Treasury, 
and  not  those  of  the  several  departments.  Upon  it  rests  the 
entire  responsibility,  subject  only  to  the  general  responsibility 
of  the  Ministry  for  which  it  acts,  of  stating  what  are  the 
financial  demands  of  the  Executive.  The  fact  that  this  state- 
ment is  "based  in  large  part  upon  requests  for  funds  filed  with 
it  does  not  lessen  this  responsibility. 

In  case  of  differences  of  opinion  between  the  petitioning 
department  and  the  Treasury  regarding  the  amount  of  funds 
to  be  asked  for,  or  whether  any  demand  at  all  shall  be  made, 
the  final  decision  rests  with  the  Treasury,  subject  only  to  the 
right  of  the  department  concerned  to  carry  the  matter  to  the 
Cabinet  as  a  whole  for  decision.  Appeals  in  this  way  are, 
in  practice,  only  made  when  the  matter  in  dispute  is  one  of 
great  importance  and  concerns  some  large  matter  of  public 

49 


BRITISH  FINANCIAL  ADMINISTRATION 


How 
Cabinet 
Disputes 
Are  Settled 


Not  a 
Variation 
in  Principle 


Procedure 
Followed 


policy  such  as  the  extension  of  a  program  of  social  reform, 
the  increase  of  the  Army  or  Navy,  etc.  Even  here  occasion 
for  an  appeal  rarely  arises,  since  all  matters  of  general  policy, 
with  rare  exceptions,  are  determined  by  the  Cabinet  before  the 
work  of  preparing  the  Estimates  is  entered  upon.  The  ex- 
planation of  the  infrequency  with  which  appeal  is  made  from 
the  decision  of  the  Treasury  is  found  in  the  strong  tradition 
that  has  developed  that  the  spending  departments  should  ac- 
cept the  decision  of  the  Treasury,  and  the  still  stronger  feel- 
ing on  the  part  of  the  Cabinet  that  in  all  appeals  brought  be- 
fore it  the  Treasury,  if  possible,  should  be  supported.  This 
is  a  matter  of  great  importance.  Were  the  practice  otherwise 
the  whole  theory  of  the  responsibility  of  the  Treasury  for 
estimates  might  easily  be  broken  down. 

Special  Procedure  for  the  Army  and  Navy  Estimates.  The 
exception  that  has  been  noted  in  respect  to  the  submission  to 
Parliament  of  estimates  for  the  War  Office  and  the  Admiralty 
by  these  departments  instead  of  by  the  Chancellor  of  the  Ex- 
chequer does  not  represent  any  real  departure  from  the  gen- 
eral principle  of  Treasury  control.  The  fact  that  the  pro- 
cedure followed  is  that  of  having  these  estimates  presented 
by  the  heads  of  the  two  departments  is  without  any  lessen- 
ing of  the  prestige  of  the  Treasury,  since  no  estimate  can 
be  submitted  until  it  has  been  presented  to,  and  has  received 
the  approval  of,  the  Treasury.  The  procedure  followed  in 
securing  this  approval  is,  however,  somewhat  different  from 
that  followed  in  the  case  of  the  civil  services. 

The  foregoing  is  clearly  brought  out  by  the  following  quo- 
tation from  the  official  memorandum  describing  the  control 
of  the  Treasury  over  the  War  Office  and  Admiralty,  filed 
with  the  Select  Committee  on  National  Expenditures  (I9O2).1 

"Control  over  Estimates :    This  in  its  initial  and  larger 
stage  is  the  control  of  the  Chancellor  of  the  Exchequer, 

Report   of   Select   Committee   on   National   Expenditure    (1902), 
Appendix  No.  3,  p.  197. 

50 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

who  settles  first  with  the  Secretary  of  State  for  War  and 
the  First  Lord  of  the  Admiralty,  and  subsequently  with 
the  Cabinet,  what  is  approximately  to  be  the  total  sum 
submitted  to  Parliament  on  account  of  Army  and  Navy 
services  in  any  given  year.  If  the  proposed  total  shows 
any  appreciable  increase,  the  Minister  will  explain  to 
what  cause  the  demand  is  due,  as,  e.  g.,  a  general  scheme 
of  reorganisation  in  the  regular  or  reserve  forces,  an 
increase  in  the  armed  strength,  an  improvement  in  the 
soldier's  or  sailor's  pay,  a  large  proposal  for  the  rearma- 
ment of  the  troops  or  of  forts,  the  necessity  for  increased 
accommodation  at  particular  stations,  some  general 
change  in  clothing,  etc.  In  the  case  of  the  Navy,  policy 
turns  chiefly  on  the  programme  of  new  construction. 

"A  general  total  having  been  arrived  at  between  Min- 
isters, the  Department  proceeds  to  draw  up  the  Estimates 
in  detail,  and  to  submit  each  vote  separately  to  the  Treas- 
ury, with  a  covering  letter,  explaining  more  or  less  fully, 
as  the  circumstances  may  require,  the  reasons  for  any 
increase  or  decrease  in  the  various  items  as  compared 
with  the  sums  taken  in  the  previous  year.  The  Estimate 
cannot  be  submitted  to  Parliament  until  Treasury  sanc- 
tion has  been  obtained,  though  such  sanction  may  be  given 
subject  to  the  results  of  further  consideration  with  regard 
to  specific  items  (all  of  which  are  scrutinised  by  the 
Treasury  as  carefully  as  time  permits). 

"New  charges  of  any  importance  are  not  to  be  inserted 
in  the  Estimates  unless  they  have  been  previously  sanc- 
tioned by  the  Treasury.  It  is  very  frequently  the  case 
that  the  Treasury  is  represented  on  Committees  with 
which  such  new  proposals  commonly  originate;  and  this 
Committee  work  is  an  important  element  in  forming 
Treasury  knowledge  and  control.  The  form  of  the  Esti- 
mates is  laid  down  by  the  Treasury,  and  no  alteration 
of  arrangement  or  classification  can  be  made  without 
Treasury  sanction." 


BRITISH  FINANCIAL  ADMINISTRATION 

Treasury  Estimates  Circular.  The  first  step  in  the  prepara- 
tion of  the  Estimates  consists  in  the  issue  by  the  Treasury, 
about  October  I  of  each  year,  of  a  circular  letter  addressed 
to  the  accounting  officers  of  the  several  civil  services,  direct- 
ing them  to  prepare  and  transmit  to  the  Treasury  the  esti- 
mates for  their  services  for  the  fiscal  year  beginning  April  I 
following.  As  these  letters  give  in  very  compact  and  at  the 
same  time  comprehensive  form  the  conditions  that  must  be 
observed  in  preparing  these  estimates,  and  the  nature  of  the 
information  that  must  be  furnished,  it  has  been  deemed  de- 
sirable to  reproduce  one  of  them  in  full.  For  this  purpose 
A  Specific  a  selection  has  been  made  of  the  "Estimates  Circular"  for 

Instruction  ,  .  ,  .  ,.      ,.,  ... 

1912-1913,  which  appears  as  Appendix  No.  i  of  the  report 
of  the  Select  Committee  on  Estimates  (I9I2).1  The  wording 
of  this  letter  may  vary  slightly  from  year  to  year,  but  its 
general  character  and  the  nature  of  the  instructions  contained 
in  it  have  now  become  practically  standardized. 


ESTIMATES  CIRCULAR  1912-1913 

TREASURY  CHAMBERS, 

2d  October,  1911. 
SIR: — 

The  Lords  Commissioners  of  His  Majesty's  Treasury 
command  me  to  transmit  to  you  the  enclosed  forms  of 
estimates  for  the  services  to  be  administered  by  your  De- 
partment during  the  year  ending  3ist  March  1913. 

One  copy  of  each  form,  after  insertion  of  the  proper 
particulars,  and  with  such  changes  as  may  be  necessary, 
should  be  returned  to  the  Treasury  in  due  course.  The 
figures  of  the  past  year  should  be  carefully  checked,  and 
corrected  where  necessary.  As  much  inconvenience  is 
caused  if  the  forms  are  not  used,  additional  copies  of 

'Report  of  the  Select  Committee  on  Estimates  (1912),  Appendix 
No.  i,  pp.  134-136. 

52 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

them,  as  well  as  of  this  covering  letter,  will  be  furnished 
to  you  if  needful. 

Date  of  Rendering  Estimates.  Such  of  the  estimates 
for  1912-1913  as  require  no  special  delay  in  their  prep- 
aration should  be  sent  to  the  Treasury  on  or  before  the 
ist  December  1911.  Those  estimates  which,  from  pe- 
culiar circumstances,  cannot  be  made  up  so  soon,  should 
be  sent  in  as  speedily  after  that  date  as  possible.  The 
latest  date  at  which  any  estimate,  or  alteration  of  an  esti- 
mate, can  be  received  will  be  the  I3th  January  1912. 

To  enable  the  Estimates  to  be  promptly  issued,  it  is 
important  that  all  questions  which  affect  the  details 
should,  unless  in  exceptional  cases,  be  settled  before  the 
Estimates  themselves  are  sent  in.  Proposals  for  which 
treasury  sanction  is  required  should  therefore  be  sub- 
mitted well  in  advance  of  the  time  for  sending  in  the 
Estimates.  If  in  any  case  questions  are  still  unavoidably 
outstanding,  the  Estimates  should  not  on  that  account  be 
delayed,  but  should  be  submitted  to  the  Treasury  in  as 
complete  a  state  as  possible,  upon  the  basis  of  existing 
rates  and  authorities,  with  the  understanding  that  the 
items  still  under  consideration  are  liable  to  alteration. 

N.  B. — In  order  that  the  Chancellor  of  the  Exchequer 
may  be  in  a  position  to  ascertain  the  probable  total  of  the 
Estimates  at  an  early  date,  it  is  requested  that  in  all  cases 
where  the  delivery  of  the  detailed  estimate  is  likely  to  be 
delayed  beyond  I5th  December  1911,  the  approximate 
total  amount,  so  far  as  can  be  foreseen,  may  be  com- 
municated to  the  Treasury  on  or  before  that  date. 

Date  of  Statements  of  Expenditure,  etc.  All  state- 
ments of  actual  expenditure  on  new  buildings  should  be 
made  up  to  the  3Oth  November  1911.  The  Estimates 
should  not,  however,  be  kept  back  on  this  account,  but 
should  be  rendered,  if  necessary,  with  such  statements 
in  blank,  leaving  the  omitted  figures  to  follow  later. 

A  like  rule  will  govern  any  other  statements  of  actual 
53 


BRITISH  FINANCIAL  ADMINISTRATION 

expenditure,  or  of  actual  receipts,  or  of  time  actually 
spent  in  particular  services,  etc.,  that  may  be  admitted  in 
the  notes  to  the  estimates. 

The  statements  of  Pensions  granted  and  ceased  should 
be  made  up  to  the  3Oth  November  1911. 

Necessity  for  Economy.  My  Lords  direct  me  to  re- 
mind you  that,  while  it  is  essential,  in  order  to  avoid 
Supplementary  Estimates,  that  no  expense  likely  to  be 
found  necessary  should  be  omitted  in  the  first  instance, 
yet  the  state  of  the  public  revenue  makes  it  imperative  to 
restrict  the  provision  to  such  services  and  sums  as  are 
urgently  required. 

Explanation  of  Estimates.  My  Lords  desire  to  im- 
press upon  Departments  the  fact  that  a  sufficient  explan- 
ation is  necessary  of  the  amount  estimated  for  a  duly 
authorised  service  even  when  it  does  not  exceed  the  esti- 
mate of  the  preceding  year.  The  habit  of  regarding  each 
year's  estimate  as  the  starting  point  for  the  next  is  one 
against  which  special  vigilance  is  needed  in  the  case  of 
services  upon  which  the  expenditure  is  in  some  degree 
discretionary,  and  My  Lords  think  it  necessary  to  warn 
Departments,  especially  those  whose  expenditure  is  of 
this  character,  that  they  must  be  prepared  to  subordinate 
such  expenditure  to  the  financial  exigencies  of  each 
year. 

Notification  of  Vacancies.  My  Lords  request  that 
Their  attention  may  be  drawn  by  a  note  upon  the  estimate 
to  any  office  provided  for  in  it  which  is  vacant  at  the 
date  of  forwarding  the  estimate,  and  as  to  the  future  of 
which  any  question  may  be  pending. 

Form  for  Explanations.  It  is  particularly  requested 
that  the  explanations  of  the  details  of  the  estimate  may 
in  all  cases  be  written  upon  the  forms  referred  to  in  Reg- 
ulation 3.  The  explanations  should  not  be  confined  to 
mere  statements  that  a  larger  or  smaller  amount  is  re- 
quired, but  should  afford  a  justification  of  the  whole 

54 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

amount  inserted.    Additional  copies  of  the  forms  can  be 
supplied  if  required. 

Progress  Reports.  In  any  case  where  the  estimate  con- 
tains provisions  for  a  special  service  which,  though  not 
permanent  in  character,  extends  over  more  than  one  year, 
My  Lords  request  that  the  estimate  may  be  accompanied 
by  a  report  on  such  services  showing — (a)  the  expendi- 
ture upon  it  to  date  as  compared  with  the  estimated  total 
cost,  (b)  the  progress  made  towards  the  completion  of 
it;  and  stating  whether  the  service  is  likely  to  be  com- 
pleted within  the  period  previously  anticipated,  and  at 
a  cost  not  exceeding  the  amount  sanctioned. 

Estimate  of  Receipts  in  Stamps.  I  am  to  request  that 
special  attention  may  be  given  to  the  preparation  of  the 
estimate  of  receipts  in  stamps  called  for  by  Regula- 
tion 13. 

Expenditure  During  the  Current  Year.  I  am  to  re- 
quest that,  in  addition  to  the  information  required  by 
Regulation  3,  the  figures  of  actual  expenditure  under 
each  subhead  may  be  given  for  the  half-year  to  3Oth  Sep- 
tember 1911,  with  any  comments  upon  them  regarded 
as  an  indication  of  the  probable  expenditure  in  the  cur- 
rent year. 

Vote  on  Account.  Before  the  commencement  of  the 
next  financial  year  Parliament  will  be  asked  to  grant  a 
Vote  on  Account  sufficient  to  provide  for  the  require- 
ments of  each  service  for  the  normal  period  of  the  Ses- 
sion. In  ordinary  course  the  Treasury  will  fix  the 
amount  to  be  included  for  a  particular  service  on  the 
basis  of  the  amounts  which  have  been  found  sufficient  in 
previous  years.  If  there  are  any  special  circumstances 
which  should  be  regarded  in  fixing  the  amount  of  your 
Vote  on  Account  for  next  year,  I  am  to  request  that  you 
will  draw  attention  to  them  in  the  letter  submitting  the 
estimate,  indicating  the  amount  which  is  likely  to  be  re- 
quired. 

55 


The  annexed  regulations  should  be  strictly  observed  in 
filling  up  the  forms  of  estimates. 

I  am,  etc., 
(Signed)     C.  HOBHOUSE. 

To  THE  ACCOUNTING  OFFICER. 

Regulations  to  be  Observed  in  Preparing  the  Civil  Service 
and  Revenue  Departments  Estimates. 

1.  Quotation  of  Statutes.     In  preparing  the  estimates 
the  references  to  the  chapters  and  sections  of  the  statutes 
relating  to  the  service  provided  for  should  be  carefully 
revised  and  corrected  according  to  the  latest  legislation, 
special  care  being  taken  to  remove  references  to  statutes 
which  have  been  repealed  or  which  are  no  longer  ap- 
plicable.    Statutes  governing  the  vote  generally  should  be 
recited  in  the  heading  of  it,  and  those  relating  to  partic- 
ular subheads  should  appear  in  the  detail  of  those  sub- 
heads. 

2.  Unsanctioned  charges  to  be  excluded.     No  charge 
for  which  due  sanction  has  not  been  already  obtained  is 
to  be  inserted  in  an  estimate.     Any  contemplated  altera- 
tion, addition,  or  new  provision,  requiring  Treasury  ap- 
proval, should  be  brought  to  Their  Lordships'  notice,  if 
possible,  in  time  for  decision  before  the  estimate  is  sent 
in.     Where  such  a  proposal  cannot  be  submitted  in  ad- 
vance of  the  estimate  it  should  be  dealt  with  in  a  separate 
explanatory  letter. 

3.  Separate    explanatory   statements    to    be    enclosed. 
The  letter  transmitting  each  estimate  should  also  enclose 
statements  written  upon  the  sheets  of  which  copies  are 
sent  herewith,  and  in  the  form  of  which  a  specimen  is 
annexed,  explaining  and  justifying  seriatim  the  amounts 
provided  in  the  estimate  under  each  subhead  of  expendi- 
ture.    The  estimated   amounts   of   receipts   in   cash   or 
stamps  should  be  similarly  explained. 

56 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

4.  Insertion  does  not  convey  sanction.     Authority  for 
a  new  or  increased  expense  is  not  to  be  inferred  from  the 
fact  of  its  having  been,  from  any  cause,  printed  in  the 
estimates  before  the  proper  official   sanction   has  been 
given. 

5.  Reference  to   Treasury  Letters.     If  Treasury  ap- 
proval has  been  signified  to  any  deviation  from  the  pro- 
vision made  in  the  estimate  for  the  preceding  year,  care 
should  be  taken  to  insert  an  accurate  reference  to  the 
number  and  date  of  the  Treasury  letter  conveying  such 
approval. 

6.  Transfer  of  charges — (a)   between  subheads;   (b) 
between  votes.     Whenever  a  transfer  of   charge   from 
one  subhead  to  another  becomes  necessary,  the  amount 
provided  for  the  previous  year  for  the  service  in  question 
should  be  also  transferred,  so  as  to  exhibit  a  proper  com- 
parison. 

A  like  course  should  be  followed  if  a  charge  be  trans- 
ferred, with  previous  Treasury  consent,  from  one  vote  to 
another. 

7.  Gross  charges  to  be  provided  for.     Each  estimate 
should  provide  for  the  gross  amount  of  charges  which 
will  probably  come  in  course  of  payment  during  the  year 
under  each  subhead ;  and  also  for  the  gross  receipt  antici- 
pated under  the  credit  subhead,  in  cases  where  the  system 
of  appropriation  in  aid  of  the  vote  has  been  introduced. 

8.  Mode  of  providing  for  personal  remunerations.    All 
charges  for  the  personal  remuneration  of  the  permanent 
or  temporary  staff  of  a  department,  including  the  pay  of 
professional  men  engaged  for  special  services,  should  be 
provided  for  in  the  subhead  for  "Salaries,  etc.,"  unless 
some  other  arrangement  has  been  specially  sanctioned  by 
the  Treasury. 

9.  Extra  remuneration   of  officers   to   be  voted.     In 
cases  where  remuneration,  exceeding  the  sum  of  £25  for 
the  financial  year,  is  received  by  any  officer  from  public 

57 


BRITISH  FINANCIAL  ADMINISTRATION 

funds  in  addition  to  the  ordinary  emoluments  of  his  office 
as  provided  in  the  estimate,  a  note  must  be  appended, 
stating  the  amount  of  such  remuneration,  the  service  for 
which  it  is  received,  and  the  source  from  which  it  is  pro- 
vided. This  rule  is  intended  to  apply  to  all  extra  re- 
muneration, however  casual  or  variable,  and  to  any  pen- 
sion or  compensation  allowance  in  respect  of  Public 
Service,  that  an  officer  may  receive,  its  object  being  to 
bring  into  one  view  the  whole  of  his  official  emoluments 
from  whatever  source.  Every  officer  is  bound  to  report 
annually  to  the  accounting  officer  of  his  department  all 
the  extra  remuneration  that  he  may  have  received  in  the 
year  from  any  external  source.  The  fact  of  an  officer 
being  provided  with  an  official  residence,  fuel,  or  light, 
at  the  public  expense,  should  also  be  recorded. 

The  mode  of  applying  the  foregoing  regulation  is  more 
fully  explained  in  Treasury  Circular  of  28th  August 
1897. 

10.  Personal  salaries.    The  estimate  should  be  accom- 
panied by  a  separate  statement  explaining  with  reference 
to  treasury  letters  of  approval,  every  "personal"  salary 
or  allowance  included  in  the  estimate. 

11.  Incidental  expenses.     The  subhead  for  incidental 
expenses  should,  as  a  general  rule,  be  confined  to  petty 
and  casual  charges,  too  insignificant  to  be  provided  for 
separately.     Details   of   it   should   be    furnished   to  the 
Treasury,  although  not  necessarily  for  publication. 

12.  Rates,  taxes,  insurance.     Special  attention  should 
be  called  to  any  provision  included  in  an  estimate  for 
rates,  taxes,  or  insurance,  with  an  explanation  of  the  cir- 
cumstances which  are  considered  to  make  such  provision 
necessary. 

13.  Receipts  in  cash  and  stamps  to  be  estimated.    Spe- 
cial care  should  be  taken  in  calculating  the  Receipts  ap- 
pertaining to  each  estimate;  and  their  nature  should  be 
stated,  so  as  to  show  the  probable  yield  of  each  principal 

58 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

source.  The  amounts  that  are  likely  to  be  collected  in 
cash  and  in  stamps  should  be  stated  separately.  If  any 
material  increase  or  decrease  be  expected  in  either  cash 
or  stamp  receipts  the  cause  thereof  should  be  explained 
to  the  Treasury,  as  prescribed  by  Regulation  3. 

14.  Responsibility  of  superior  Departments.  Depart- 
ments charged  with  the  duty  of  accounting  for  Parlia- 
mentary grants  for  Subordinate  Departments  or  Services 
will  be  responsible  for  the  observance  of  these  regula- 
tions in  the  preparation  and  transmission  of  the  several 
estimates  of  such  Subordinate  Departments  and  Services. 


ESTIMATES  FORM:   EXPLANATION   OF  INCREASES  OR 
DECREASES 

Title  of  Vote.. 


Subhead 


Explanation  of  Increase  or  De- 
crease in  the  Estimate  for 
1912-13 


A.  Salaries 

Estimate  1912-1913 

"        1911-1912 

Expenditure  1911-1912 

(Six  months  to  3Oth 
September  1911.) 

1910-1911 

1909-1910 

"  .    1908-1909 

B.  Travelling 
Estimate  1912-1913 

"        1911-1912 

Expenditure  191 1-1912 

(Six  months  to 
September  1911.) 

1910-1911 

1909-1910 

1908-1909 

Etc.,  etc. 
Receipts,  or  Credit  Subhead. 

Estimates  1912-1913 

1911-1912 

Receipts  1911-1912 

(Six  months  to  3Oth  Sep- 
tember 1911.) 

"     •  1910-1911 

"        1909-1910 

"        1908-1909 


59 


BRITISH  FINANCIAL  ADMINISTRATION 


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M 
M 
Ol 
M 

3 

, 

60 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

Estimates  as  Submitted  by  the  Several  Departments  to  the 
Treasury  in  Large  Part  but  a  Summation  of  Provisions  Al- 
ready Approved  by  the  Treasury.    There  are  certain  features 
of  this  request  for  estimates  that  are  of  great  interest,  but   Method  of 
which  would  probably  escape   notice  unless  attention  were  Preventins 

i_/vcr~ 

specially  directed  to  them.  The  first  and  much  the  most  estimates 
important  of  these  is  that  expressed  in  Regulation  No.  2,  that 
"no  charge  for  which  due  sanction  has  not  been  already  ob- 
tained is  to  be  inserted  in  an  estimate.  Any  contemplated 
alteration,  addition,  or  new  provision  requiring  Treasury  ap- 
proval, should  be  brought  to  their  Lordships'  notice,  if  pos- 
sible, in  time  for  decision  before  the  estimate  is  sent  in. 
When  such  a  proposal  cannot  be  submitted  in  advance  of  the 
estimate  it  should  be  dealt  with  in  a  separate  explanatory 
letter." 

This  rule  bears  upon  an  aspect  of  the  budgetary  practice  Central 
of  Great  Britain  which,  so  far  as  the  commission  is  aware,  0^T° 
has  received  little  attention  on  this  side  of  the  water,  yet  it  Changes 
constitutes  a  most  vital  feature  of  the  whole  system  of  Treas- 
ury control  of  the  procedure  in  preparing  and  submitting  the 
annual  estimates.  This  feature  is  that  the  powers  of  the 
Treasury  to  control  are  exerted  before,  not  after,  the  esti- 
mates for  the  several  services  are  received  by  it.  It  is  the 
duty  of  each  service,  as  points  arise  which,  in  its  opinion,  will 
make  desirable  changes  in  existing  financial  provisions,  to 
bring  these  points  to  the  attention  of  the  Treasury  by  letters 
and  to  secure  Treasury  sanction  for  such  changes.  Under  this 
arrangement  each  change  desired  is  taken  up  and  considered 
upon  its  merits  under  circumstances  which  give  ample  time 
and  opportunity  for  due  consideration  of  the  proposed 
change.  This  in  fact  is  what  actually  takes  place  in  the  case 
of  almost  all  changes  of  importance  that  the  departments  de- 
sire to  have  made.  The  result  is  that  the  estimates,  when 
finally  submitted  by  the  departments,  represent  little  more 
than  the  statement  of  proposals  that  have  already  been  agreed 
upon  between  the  various  submitting  departments  and  the 

61 


BRITISH  FINANCIAL  ADMINISTRATION 


Depart- 
mental 
Estimates  a 
Summation 
of   Prior 
Decisions 


Fullness  of 
Supplemen- 
tary Data 


Comparison 
of  Expendi- 
tures 


Treasury.    Excepting  in  emergency,  it  should  never  be  neces- 
sary to  include  items  not  approved  in  advance. 

Sir  Robert  Chalmers,  Permanent  Secretary  of  the  Treas- 
ury, has  brought  out  this  fundamental  feature  of  the  English 
estimate  system  in  a  very  clear  manner  in  his  testimony  be- 
fore the  Select  Committee  on  Estimates  (1912).  After  quot- 
ing the  regulation  he  said : 1 

"The  important  thing  which  I  want  the  Committee  to 
realise  from  the  two  paragraphs  of  the  Circular  which  I 
have  read  is  that  really  the  sending  in  of  an  Estimate  is 
rather  a  summation  of  previous  decisions  on  details  than 
a  sudden  and  initial  demand  for  money.  In  all  Estimates 
as  they  come  in  there  are  references  to  Treasury  Author- 
ities which  have  been  given  on  nearly  all  specific 
cases.  .  .  .  What  I  want  to  make  clear  is  that  right 
through  the  year  beginning  with  April,  the  preparation 
of  the  Estimate  is  going  on  in  detail  and  the  Estimate 
itself  is  more  a  summary  than  anything  else  so  far  as  the 
ordinary  Departments  are  concerned,  whose  work  is  not 
enlarged  by  sudden  legislation  at  the  end." 

Comparative  and  Explanatory  Data  Required.  A  second 
point  of  importance  is  the  fullness  of  the  data  that  are  re- 
quired for  comparative  and  explanatory  purposes.  As  is  else- 
where described,  appropriations  are  made  under  certain  gen- 
eral heads  known  technically  as  "votes."  The  total  of  each 
vote  is  subdivided  under  what  are  known  as  "subheads,"  which 
represent  the  heads  under  which  all  accounting  of  the  money 
carried  by  each  is  to  be  rendered.  Reference  to  the  form 
entitled  Explanation  of  Increase  or  Decrease  shows  that  for 
each  subhead  there  must  be  given,  in  addition  to  the  amount 
estimated  for  the  ensuing  fiscal  year:  (i)  The  estimate  for 
the  current  year;  (2)  actual  expenditures  for  the  first  six 
months  of  the  current  year;  and  (3)  expenditures  for  each 

Report  of  the  Select  Committee  on  Estimates  (1912),  p.  2. 

02 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

of  the  three  years  preceding.  If  the  service  is  one  which 
receives  any  income  from  any  source,  corresponding  data 
must  be  given  regarding  such  income.  • 

In  respect  to  changes  of  personnel  a  detailed  statement  must  List  of 

...  -it  -iiri  •         Personnel 

be  submitted,  on  a  special  form  provided  for  the  purpose,  giv- 
ing under  the  heading  "Establishment"  a  list  of  all  positions 
to  be  provided  for,  and  showing  for  each  position :  ( I )  The 
number  of  employees  for  the  current  year;  (2)  the  number 
desired  for  the  ensuing  year;  (3)  the  scale  of  salary  to  be 
paid,  showing  the  minimum  salary  carried  by  the  position,  the 
annual  increment  provided  for  length  of  service  and  the  maxi- 
mum salary  that  can  be  paid;  (4)  the  total  provision  made 
for  the  payment  of  salaries  of  persons  in  each  position;  and 
(5)  the  total  sum  that  will  be  required  for  making  such  pay- 
ment in  the  ensuing  year. 

In  accordance  with  other  regulations,  details  must  be  given  Details  of 
regarding  the  items  of  incidental  expenses  and  other  subheads.   Expenses 
We  have  already  noted  that  for  the  most  part  all  changes  in 
proposed   estimates   over  current  provision  have  previously 
been  brought  to  the  attention  and  received  the  approval  of 
the  Treasury.     The  regulations  require  that  reference  shall 
be  made  to  all  letters  of  the  Treasury  in  which  such  changes 
have  been  authorized. 

In  connection  with  the  securing  of  data  for  comparative  Comparative 
purposes  it  is  of  interest  to  note  that  these  data  are  as  far  p^f^  by 'the 
as  possible  inserted  by  the  Treasury  in  the  forms  before  they  Treasury 
are  sent  to  the  departments.    Thus,  for  example,  in  the  form 
upon  which  the  details  regarding  personnel  are  to  be  given, 
all  of  the  eight  columns  except  the  two  calling  for  the  esti- 
mates proper  for  the  year  to  which  the  estimates  relate  are 
filled  in  by  the  Treasury  before  the  form  is  sent  out.    All  that 
the  departments  hav»  to  do  is  to  verify  these  figures  and  fill 
in  the  two  columns  remaining.     This  procedure  insures  that 
the  Treasury  will  get  the  information  in  precisely  the  form 
and  detail  desired  by  it.     What  is  of  equal  importance,  it 
expedites  enormously  the  subsequent  work  of  scrutinizing  the 

63 


BRITISH  FINANCIAL  ADMINISTRATION 


Estimates 
Filled  In  by 
Department 


Responsi- 
bility Placed 
on  Exec- 
utive 


returns  and  getting  them  into  shape  for  transmission  to  Par- 
liament. At  best  the  Treasury  has  thrown  upon  it  a  great 
volume  of  work  that  has  to  be  done  with  the  greatest  expedi- 
tion possible.  It  is  evident  that  this  procedure,  taken  in  con- 
nection with  the  fact  that  almost  all  changes  of  importance 
have  already  been  considered  and  passed  upon,  facilitates  this 
work  greatly. 

The  figures  filled  in  for  the  current  year  represent  the  aggre- 
gation of  the  original  estimates  and  any  supplemental  esti- 
mates that  may  have  been  granted.  It  should  be  noted,  how- 
ever, that  it  is  possible  for  further  grants  to  be  made  for  the 
current  year,  since  the  final  supplementary  votes  of  one  finan- 
cial year  are  not  generally  taken  until  after  the  estimates  for 
the  following  year  have  been  presented.  This  is  unfortunate, 
but  apparently  unavoidable. 

Finally,  it  may  be  noted  that  it  is  the  custom  for  each  serv- 
ice to  send  in  the  estimates  with  a  general  covering  letter  in 
which  attention  is  directed  to  any  matter  of  especial  im- 
portance and  particularly  to  those  changes  which  for  any  rea- 
son have  not  already  received  the  Treasury  sanction. 

Estimates  to  Be  Justified,  Though  No  Increase  Is  Requested. 
A  minor  point,  and  yet  one  of  no  little  importance,  is  that 
covered  by  the  section  of  the  "Estimates  Circular"  which  pro- 
vides that  "My  Lords  desire  to  impress  upon  Departments 
the  fact  that  a  sufficient  explanation  is  necessary  of  the 
amount  estimated  for  a  duly  authorized  service  even  when 
it  does  not  exceed  the  estimate  of  the  preceding  year.  The 
habit  of  regarding  each  year's  estimate  as  the  starting  point 
for  the  next  is  one  against  which  special  vigilance  is  needed 
in  the  case  of  services  upon  which  the  expenditure  is  in  some 
degree  discretionary."  It  is  one  thing  to  keep  down  addi- 
tional expense  and  quite  another  to  effect  reductions  in  au- 
thorized expenditures  in  the  past  which  are  in  excess  of  pres- 
ent real  needs.  The  requirement  quoted,  in  addition  to  being 
a  general  appeal  for  economy,  has  for  its  purpose  the  laying 

64 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

of  the  basis  for  the  Treasury  questioning  any  item,  whether 
or  not  it  exceeds  the  provision  for  the  current  year.  It  is 
the  duty  of  the  Treasury  to  familiarize  itself  as  far  as  pos- 
sible with  the  needs  of  the  several  departments  and  to  effect 
reductions  as  well  as  to  check  increases.  It  goes  without 
saying,  however,  that  the  effectiveness  of  its  action  in  respect 
to  the  first  is  much  less  than  it  is  as  regards  the  second  require- 
ment. 

Preparation  of  Estimates  Within  the  Departments.  Only 
a  few  words  need  be  said  regarding  the  methods  followed 
by  the  departments  in  preparing  their  estimates.  Their  task 
has  been  much  simplified  by  the  Treasury  having  filled  in  much 
of  the  comparative  data  before  the;  forms  are  sent  to  them, 
and  still  more  so  by  the  fact  that  almost  all  the  contemplated  Methods 
changes  over  existing  provisions  have  already  been  raised 
with  the  Treasu%r  and  received  a  settlement.  The  nature  of 
the  work  to  be  done  by  them  is  described  in  the  "Memoran- 
dum on  the  Annual  Estimates"  which  is  appended  to  the  re- 
port of  the  Select  Committee  on  National  Expenditures 
(1902),  in  the  following  terms:1 

"The  work  of  preparation  of  the  Estimate  within  the 
Department  itself  varies  in  its  character  according  to  the 
scope  of  the  Department  and  of  its  Vote.  In  the  case  of 
small  Departments,  where  the  whole  establishment  is  Varies  in 
congregated  under  one  roof,  the  accounting  officer,  as-  Departments 
sisted  by  the  officer  in  charge  of  the  accounts,  has  usually 
all  the  materials  at  hand.  The  establishment  books  of 
the  department  show  the  salary  of  every  officer  and  the 
date  at  which  his  next  increment  accrues,  and  records  are 
kept  of  any  decisions  involving  changes  of  the  establish- 
ment. It  is  thus  possible  to  calculate  with  exactitude  the 
amount  which  will  be  required  for  personal  remunera- 
tion, subject  of  course  to  any  changes  which  may  arise 

Report  of  Select  Committee  on  National  Expenditure  (1902),  p. 
192. 

65 


BRITISH  FINANCIAL  ADMINISTRATION 


Subsidiary 
Estimates 


through  death  or  other  unexpected  causes.  For  the  other 
Subheads  of  the  Vote,  comprising  the  charges  incidental 
to  the  work  of  the  Department,  the  accounting  officer  is 
guided  by  past  expenditure,  as  well  as  by  his  knowledge 
of  any  changes  which  have  been  effected  or  may  be  im- 
pending in  the  Department's  business,  and  any  doubtful 
points  are  settled  in  consultation  with  the  officers  whose 
work  they  specially  concern. 

"In  the  large  Departments  many  of  the  Subheads  of 
the  Vote  can  be  estimated  in  the  same  way  by  the  account- 
ing officer  from  his  general  knowledge  and  experience. 
But  where  there  are  larger  branches  of  the  Department 
carrying  on  their  work  away  from  its  headquarters,  it 
may  be  necessary  to  obtain  subsidiary  estimates  from  the 
heads  of  those  branches  of  their  portion  of  the  expendi- 
ture. In  the  Inland  Revenue  Department,  for  instance, 
reference  is  made  to  the  Controller  of  Stamps  and  Stores, 
the  Chief  Inspector  of  Taxes,  the  Government  Chemist 
and  the  local  Collectors,  before  fixing  the  provision  for 
the  Subheads  with  which  they  are  concerned.  When  the 
necessary  particulars  have  been  obtained  they  are  collated 
by  the  accounting  officer  and  the  estimate  as  a  whole  is 
reviewed  by  him  under  the  direction  of  the  head  of  the 
department ;  and  the  demands  of  individual  branches  may 
have  to  be  reduced  before  the  Estimate  is  forwarded  to 
the  Treasury,  either  on  their  own  merits,  or  on  a  con- 
sideration of  the  total  of  the  Estimate  and  the  compara- 
tive strength  of  other  claims." 


Comparison  The  process  of  preparing  the  estimates  in  the  departments 
Practice  is  thus  not  dissimilar  from  that  obtaining  in  the  United  States, 
with  this  important  exception :  In  Great  Britain  there  is  one 
important  officer  of  high  rank,  and  with  real  authority  and 
responsibility,  whose  duty  it  is  not  only  to  prepare  the  esti- 
mates, but  to  use  his  utmost  efforts  to  see  that  they  do  not 
call  for  expenditures  not  justified  by  the  real  needs  of  the 

66 


Here 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

service.  In  the  Uftited  States  the  responsibility  falls  upon 
the  head  of  the  service.  As  this  official  is  one  who  usually 
changes  with  each  administration,  who  thus  has  not  grown 
up  with  the  service  and  who  has  no  intimate  and  detailed 
knowledge  of  the  requirements,  his  responsibility  is  of  the 
most  general  character.  Certainly  he  is  not  in  a  position 
to  exercise  as  intelligent  direction  and  control  over  the  de- 
tails of  the  estimate  as  is  the  permanent  acounting  officer  under 
the  British  system. 

Examination  of  the  Estimates  by  the  Treasury.  Having 
reached  the  Treasury,  the  next  step  in  getting  the  estimates 
into  shape  is  their  critical  examination  and  revision  by  that  Procedure 

.  ...  .  .of  Review 

authority.     The  manner  in  which  this  work  is  performed  is  and  Revision 
excellently  described  in  the  memorandum  from  which  we  have 
just  quoted.1 

"When  the  Estimates  for  the  Civil  Services  and  Rev- 
enue Departments  reach  the  Treasury  they  are  examined 
by  the  Estimate  Clerk,  assisted  by  one  of  the  junior 
clerks.  The  first  business  of  the  juniors  is  to  go  through  Examination 

,,     ,       ,,  ,.     ,       T-,     .  ...  .  by  Estimate 

all  the  figures  of  the  Estimate,  noting  in  the  margin  the  clerk 
-  increase  or  decrease  on  every  item  which  shows  a  differ- 
ence from  the  previous  year,  either  as  regards  number  of 
staff  or  amount  of  provision.  Any  alteration  which  the 
Department  proposes  to  make  in  the  body  of  its  Estimate, 
in  the  particulars  represented  by  Columns  3  to  6  (Estab- 
lishment and  scale  of  salary)  of  the  form  already  de- 
scribed, is  at  once  apparent  because  the  existing  state  of 
things  is  represented  by  the  printed  matter  of  the  form. 
All  variations  of  this  kind,  as  well  as  all  changes  in  the 
amount  of  the  monetary  provision  which  are  not  the 
result  of  the  automatic  operation  of  progressive  scales  of 
pay,  are  then  compared  with  the  record  of  Treasury  sanc- 

1  Report  of  the  Select  Committee  on  National  Expenditure,  1902, 
p.  192. 

67 


BRITISH  FINANCIAL  ADMINISTRATION 


Conference 
with 

Department 
Officers 


tions  relating  to  the  Estimate  which  has  been  given  since 
the  previous  year's  Estimate  was  framed.  For  the  pur- 
pose of  this  record,  the  several  divisions  of  the  Treasury 
have  from  time  to  time  referred  to  the  Estimate  Clerk 
any  decisions  of  the  Board  of  Treasury  which  would 
entail  alterations  in  any  estimate.  Every  change  which 
the  estimate  shows  should  be  either  covered  by  a  sanction 
thus  recorded  or  be  otherwise  satisfactorily  accounted  for 
in  the  Department's  explanations. 

"The  Estimate  Clerk  examines  the  estimate  as  regards 
any  discrepancy  on  the  above  points,  and  also  considers 
the  necessity  for  the  monetary  provision  in  the  light  of 
past  expenditure  and  of  the  explanations.  Each  separate 
subhead  is  regarded,  and  also  the  estimate  as  a  whole.  It 
it  not  sufficient  merely  to  examine  the  subheads  piecemeal 
for  this  reason: — 'The  ideal  of  a  scrupulous  accounting 
officer  is  apt  to  be  to  provide  on  each  individual  subhead 
enough  money  for  its  probable  requirements  with  a  small 
margin  for  contingencies.  In  an  estimate  which  has  a 
large  number  of  subheads  the  effect  of  providing  for 
each  one  thus  fully  may  be  to  take  an  excessive  amount 
for  the  vote  as  a  whole,  even  though  no  particular  sub- 
head could  be  regarded  as  extravagant.  In  order  to 
guard  against  this  tendency,  the  Treasury  has  to  pay 
regard  to  the  total  vote,  so  as  to  ensure  that  proper  allow- 
ance is  made  for  the  compensating  effect  of  surpluses  and 
deficiencies  in  the  various  subheads.  If  the  Estimate 
Clerk  is  in  doubt  as  to  the  effect  proposed  to  be  given  to 
any  Treasury  sanction  he  refers  the  estimate  to  the  Prin- 
cipal Clerk  in  charge  of  the  Treasury  Division  which 
deals  with  the  Department  concerned.  That  officer  is 
also  consulted  as  to  any  new  proposal  referred  to  in  the 
estimate,  and  even  in  the  absence  of  such  special  reason, 
he  has  usually  the  opportunity  to-  advise  upon  any  impor- 
tant estimate  relating  to  the  departments  with  which  he 
deals. 

68 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

"The  estimate  then  goes  before  the  Financial  Secre-  Review  by 
tary,  who  directs  the  action  to  be  taken  upon  any  of  the  Secretary 
points  submitted  to  him  by  his  subordinates.  He  also 
considers  the  estimate  in  its  general  bearings,  by  his 
knowledge  of  the  affairs  of  the  Department,  of  Parlia- 
mentary opinion  upon  the  services  for  which  this  Esti- 
mate provides,  and  of  the  financial  circumstances  of  the 
time.  He  decides  whether  the  estimate  shall  be  approved 
as  submitted,  or  what  criticisms  and  suggestions  for  its 
amendment  shall  be  offered  to  the  Department.  In  the 
latter  event,  subsequent  correspondence  may  elicit  explan- 
ations from  the  Department  which  will  justify  the  Treas- 
ury in  passing  the  Estimate,  or  alterations  may  be  agreed 
between  the  Departments.  Should  agreement  not  be 
reached,  it  would  be  open  to  the  Treasury,  in  the  last 
resort,  in  the  exercise  of  its  responsibility,  to  present  the 
Estimate  to  Parliament  in  the  shape  approved  by  the 
Treasury." 

Transmission  of  the  Estimates  to  the  House  of  Commons. 
The  fiscal  year,  it  will  be  remembered,  begins  April  i.  The 
"Estimates  Circular,"  calling  for  estimates  from  the  several 
civil  departments,  is  issued  about  October  i  of  the  year  pre- 
ceding. It  directs  that  when  possible  the  departments  should  Date  .of. 

.  Submission 

make  their  returns  by  December  i.  Inasmuch  as  there  are 
certain  estimates  which  cannot  be  framed  so  far  in  advance 
of  the  financial  year  to  which  they  relate,  a  further  date  is 
mentioned  upon  which  these  estimates  should  be  in  hand. 
This  latter  date  varies  from  year  to  year,  according  to  the 
period  at  which  Parliament  is  expected  to  assemble,  but  usu- 
ally is  some  date  early  in  January.  In  practice  the  bulk  of 
the  estimates  reach  the  Treasury  between  December  i  and  the 
date  so  fixed.  The  middle  of  January  may  therefore  be  taken 
as  the  date  upon  which  all  estimates  must  be  in  the  hands 
of  the  Treasury.  As  has  been  pointed  out,  the  Treasury  has 
already  done  the  bulk  of  its  work  in  passing  upon  applica- 

69 


BRITISH  FINANCIAL  ADMINISTRATION 


tions  for  changes  presented  to  it  one  by  one  by  the  several 
departments.  The  work  of  further  studying  the  estimates, 
deciding  points  still  open,  and  assembling  the  material,  thus 
proceeds  rapidly.  Parliament  usually  convenes  some  time  in 
February.  Shortly  after  it  assembles,  the  estimates  are  in 
form  and  are  laid  before  it.  The  estimates  for  1914-1915 
bear  the  date  of  March  2,  1914. 

Supplementary  Estimates.    As  it  is  impossible  for  the  de- 
partments in  preparing  their  estimates  to  foresee  all  contin- 
Conditions      gencies,  and  as  conditions  may  easily  arise  calling  for  the 
Whfch  They   expenditure  of  funds  not  provided  for  in  the  regular  esti- 
Are  Made      mates,  the  departments  from  time  to  time  send  supplementary 
estimates  to  the  Treasury,  which,  if  approved  by  that  author- 
ity, are  laid  before  Parliament.     These  supplementary  esti- 
mates are  apt  to  represent  new  demands  rather  than  additions 
to  demands  already  contained  in  the  regular  estimates,  for 
all  minor  deficiencies  under  one  head  can  be  met  by  transfers 
of  money  from  other  heads  under  a  system  that  will  be  pres- 
ently described.     Thus  supplementary  estimates  are  resorted 
to  only  when  the  amount  asked  for  is  important  and  exceeds 
the  total  resources  of  the  department. 

Though  supplementary  estimates  may  be  submitted  at  any 
time,  it  is  usual  for  the  Treasury  to  submit  them  to  the  House 
of  Commons  in  two  batches:  One  in  July  prior  to  the  ad- 
journment of  Parliament  for  the  summer  and  prior  to  the 
passage  of  the  annual  appropriation  act,  and  the  other  in 
February  just  prior  to  the  close  of  the  fiscal  year.  These  are 
known  as  the  summer  and  the  February  supplementaries. 
Both,  it  will  be  noted,  are  submitted  during  the  fiscal  year 
to  which  they  relate.  If  the  regular  estimates  have  not  been 
considered  prior  to  the  submission  of  the  summer  supple- 
mentaries, the  two  are  considered  together.  It  should  be  ob- 
served that  in  the  annual  estimates,  when  grants  for  the  cur- 
rent year  are  given,  for  comparative  purposes,  they  include 
the  sums  granted  in  pursuance  of  the  summer  supplementaries, 

70 


Usually 
Submitted 
in    Two 
Batches 


ESTIMATES:    PREPARATION  AND  SUBMISSION 

but  not  those  called  for  by  the  February  supplementaries. 
Every  effort,  however,  is  made  to  have  the  regular  or  sum- 
mer supplementaries  cover  all  expenditures,  with  the  result 
that  the  February  supplementaries  are  usually  small  in  amount 
and  relate  to  but  a  few  votes. 


CHAPTER  IV 
THE  ESTIMATES :    CHARACTER  AND  FORM 

Classification  of  Estimates;  Appropriation  Heads:  "Votes";  Appro- 
priation Subheads;  Supporting  Details;  Order  of  Presentation  of 
Data;  General  Summaries  and  Analyses. 

We  have  now  reached  the  position  where  the  estimates 

have  been  received,  compiled,  and  laid  before  Parliament  by 

the  Chancellor  of  the  Exchequer  and  the  heads  of  the  War 

and  Navy  departments.     In  our  analysis  of  the  problem  of 

"The  Esti-     administering  the  public  finances  of  a  nation  we  have  pointed 

mates"  only  ....  , . 

a  Part  of  a    out  that  the  summaries  of  estimated  expenditures  commonly 
Budget  called  "The  Estimates"  proper  constitute,  or  should  be  made 

to  constitute,  but  one  part  of  a  financial  plan  presented  in 
a  document  known  as  "The  Budget" — the  function  of  "The 
Budget"  being  to  bring  such  estimates  into  comparison  with 
past  expenditures,  current  appropriations,  and  the  resources 
available  with  which  to  meet  the  expenditures  proposed.  If 
the  estimates  are  to  be  of  a  character  such  that  their  purport 
can  be  readily  seen,  it  is  imperative  that  they  be  classified, 
summarized,  and  compared  with  past  expenditures  and  ap- 
propriations in  such  a  way  that  the  appropriating  authority 
and  the  general  public  can  readily  determine  the  extent  to 
which  these  estimates  represent  a  change  in  policy  in  respect 
to  the  expenditure  of  funds,  the  objects  for  which  increased 
expenditure  is  proposed,  and  those  for  which  a  reduction  of 
expenditures  is  called  for. 

This  subject  of  the  form  in  which  the  estimates  should  be 
submitted  and  the  summaries  and  comparative  tables  that 
should  accompany  them,  in  order  that  their  significance  may 
be  seen,  is  one  of  great  importance.  The  commission  has, 

72 


ESTIMATES:    CHARACTER  AND  FORM 

therefore,  in  the  pages  that  immediately  follow,  sought  to 
give  as  full  a  description  of  the  character  of  the  English  esti- 
mates as  they  come  before  Parliament  as  it  is  possible  to  do 
without  actually  reproducing  the  estimates  themselves  in  full. 

Classification  of  Estimates.     The  whole  character  of  the  Expendi- 

.....  ,  tures  by 

estimates  depends  on  the  manner  m  which  the  sums  asked  for  Services 
are  classified  and  totaled.     The  first  classification  is  that  be- 
tween the  four  groups  of  services,  which  are  designated : 

1.  Army 

2.  Navy 

3.  Civil  Services 

4.  Revenue  Departments 

» 

The  Army  and  Navy  estimates  embrace  the  estimates  not 
only  for  the  military  and  naval  establishments,  but  for  the 
War  Office  and  the  Admiralty,  by  which  these  establishments  Army  and 

N^3.W 

are  administered.  The  result  of  this  primary  classification  is  Services 
to  distinguish  clearly  between  estimates  and  expenditures  for 
military  and  naval  purposes  and  those  for  civil  purposes.  The 
distinction  between  the  civil  services  and  the  revenue  depart- 
ments is  also  one  of  great  value.  In  this  connection  it  should 
be  noted  that  the  Treasury  quite  properly  is  not  treated  as 
one  of  the  revenue  departments,  but  as  one  of  the  civil 
services. 

As  the  Army  and  Navy  represent  unifunctional  services,  no 
further  classification  of  estimates  and  expenditures  is  made 
in  respect  to  them  except  that  represented  by  the  individual  Civil  and 
"vote,"  to  which  attention  will  shortly  be  directed.     The  civil  Services 
services  and  revenue  departments  are,  however,  further  classi- 
fied, the  former  into  seven  and  the  latter  into  three  groups,  as 
follows : 

Civil  Services : 

1.  Public  Works  and  Buildings 

2.  Salaries  and  Expenses  of  Civil  Departments 

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BRITISH  FINANCIAL  ADMINISTRATION 

3.  Law  and  Justice 

4.  Education,  Science  and  Art 

5.  Foreign  and  Colonial  Services 

6.  Non-effective  and  Miscellaneous  Services 

7.  Old-age  Pensions,  Labor  Exchanges,  Insurance,  etc. 

Revenue  Departments : 

1.  Customs  and  Excise 

2.  Inland  Revenue 

3.  Post  Office 

Groupings          These  groupings  are  historical  rather  than  logical.  Whether 

Historical,  ._  .  ,         ,  .... 

cot  Logical  or  not  the  classification  may  be  considered  as  one  which  m 
the  main  is  satisfactory,  it  clearly  distinguishes  between  such 
important  groups  of  expenditure  as  those  for  the  adminis- 
trative services  proper  (Class  2),  those  for  judicial  purposes 
(Class  3),  those  for  public  works  (Class  i),  etc.  Class  2 
includes  expenditures  for  Parliament  as  well  as  those  for 
the  executive  departments  proper,  but  the  two  are  clearly  dis- 
tinguished by  separate  votes  within  the  class.  In  all  cases 
the  departments  handling  the  kind  of  business  to  which  a  class 
relates  are  included  in  that  class,  and  not  in  the  class  of  sala- 
ries and  expenses  of  civil  departments.  This  is  as  it  should 
be,  since  it  brings  together  all  expenditures  relative  to  a  par- 
ticular category  of  work. 

Appropriation    Heads:    "Votes."      The    next    subdivision 
within  these  classes  consists  of  the  heads  under  which  appro- 
Character       priations  are  actually  made,  or,  as  they  are  technically  called, 
of"  "Votes""    "votes" — or  a  subdivision  on  which  a  separate  vote  will  be 
asked  when  the  estimates  are  being  considered  in  committee 
of  the  whole  on  supply.     Of  such  votes  there  are  15  in  the 
Army  estimates,  15  in  the  Navy  estimates,  120  in  the  Civil 
Service  estimates  and  3  in  the  Revenue  Department  estimates, 
a  total  of  153  heads  under  which  appropriations  are  made.    As 
few  matters  in  connection  with  the  grant  of  funds  for  the 

74 


ESTIMATES :    CHARACTER  AND  FORM 

conduct  of  Government  operations  are  of  greater  importance 
than  the  particularity  with  which  appropriations  are  made, 
it  has  been  thought  desirable  to  reproduce  these  153  appropria- 
tions heads  in  full  in  the  order  in  which  they  appear  in  the 
estimates.  They  are  as  follows : 

I.  ARMY 

1.  Pay,  etc.,  of  the  Army 

2.  Medical  Establishments:     Pay,  etc. 

3.  Special  Reserve 

4.  Territorial  Forces 

5.  Establishments  for  Military  Education 

6.  Quartering,  Transport  and  Remount 

7.  Supplies  and  Clothing. 

8.  Ordnance  Department  Establishments  and  General 
Stores 

9.  Armament,  Engineer  and  Aviation  Stores 

10.  Works  and  Buildings 

11.  Miscellaneous  Effective  Services 

12.  War  Office 

Non-effective  Services 

13.  Non-effective  Charges  for  Officers,  etc. 

14.  Non-effective  Charges  for  Men,  etc. 

15.  Civil  Superannuation,  Compensation  and  Gratuities 

II.  NAVY 

1.  Wages  of  Officers,  Seamen  and  Boys,  Coast  Guards 
and  Royal  Marines 

2.  Victualing  and  Clothing  for  the  Navy 

3.  Medical  Establishments  and  Services 

4.  Civilians  Employed  on  Fleet  Services 

5.  Educational  Services 

6.  Scientific  Services 

75 


BRITISH  FINANCIAL  ADMINISTRATION 

7.  Royal  Naval  Reserves 

8.  Shipbuilding,  Repairs,  Maintenance,  etc. 

9.  Naval  Armament 

10.  Works,    Buildings,    and    Repairs    at    Home    and 
Abroad 

11.  Miscellaneous  Effective  Services 

12.  Admiralty  Office 

13.  Half  Pay  and  Retired  Pay 

Non-effective  Services 

114.  Naval  and  Marine  Pensions,  Gratuities,  and  Com- 
pensation Allowances 

15.  Civil  Superannuation,  Compensation  Allowances 
and  Gratuities 

III.     CIVIL  SERVICES 
CLASS  I.     PUBLIC  WORKS  AND  BUILDINGS 

1.  Royal  Palaces 

2.  Osborne 

3.  Royal  Parks  and  Pleasure  Grounds 

4.  House  of  Parliament  Buildings 

5.  Miscellaneous  Legal  Buildings,  Great  Britain 

6.  Art  and  Science  Buildings,  Great  Britain 

7.  Diplomatic  and  Consular  Buildings 

8.  Revenue  Buildings 

9.  Labor  Exchange  Buildings,  Great  Britain 
10.  Public  Buildings,  Great  Britain 

n.  Surveys  of  the  United  Kingdom 

12.  Harbors  under  the  Board  of  Trade 

13.  Peterhead  Harbor 

14.  Rates  on  Government  Property 

15.  Public  Works  and  Buildings,  Ireland 

1 6.  Railways,  Ireland 

17.  The  Palace  of  Peace,  The  Hague 

76 


ESTIMATES:    CHARACTER  AND  FORM 

CLASS  II.     SALARIES  AND  EXPENSES  OF  CIVIL  DEPARTMENTS 
United  Kingdom  and  England 

1.  House  of  Lords  Offices 

2.  House  of  Commons 

3.  Treasury  and  Subordinate  Departments 

4.  Home  Office 

5.  Foreign  Office 

6.  Colonial  Office 

7.  Privy  Council  Office 

8.  Board  of  Trade 

9.  Mercantile  Marine  Services 

10.  Bankruptcy  Department  of  the  Board  of  Trade 

n.  Board  of  Agriculture  and  Fisheries 

12.  Charity  Commission 

13.  Chemist,  Government 

14.  Civil  Service  Commission 

15.  Exchequer  and  Audit  Department 

1 6.  Friendly  Societies  Registry 

17.  Local  Government  Board 

1 8.  Lunacy  Commission 

19.  Mint,  including  Coinage 

20.  National  Debt  Office 

21.  Public  Record  Office 

22.  Public  Works  Loan  Commission 

23.  Registrar  General's  Office 

24.  Stationery  and  Printing,  Stationery  Office 

25.  Wood,  Forest,  etc.,  Office  of 

26.  Works  and  Public  Buildings,  Office  of 

27.  Secret  Service 

Scotland 

28.  Secretary  for  Scotland,  Office  of 

29.  Board  of  Agriculture 

77 


BRITISH  FINANCIAL  ADMINISTRATION 

30.  Fishery  Board 

31.  Lunacy  Commission  and  General  Board  of  Con- 
trol 

32.  Registrar  General's  Office 

33.  Local  Government  Board 

Ireland 

34.  Lord  Lieutenant's  Household 

35.  Chief  Secretary's  Offices  and  Subordinate  Depart- 
ments 

36.  Department  of  Agriculture  and  Technical  Instruc- 
tion 

37.  Charitable  Donations  and  Bequests  Office 

38.  Congested  Districts  Board 

39.  Local  Government  Board 

40.  Public  Record  Office 

41.  Public  Works  Office 

42.  Registrar  General's  Office 

43.  Valuation  and  Boundary  Survey 

CLASS  III.     LAW  AND  JUSTICE 
United  Kingdom  and  England 

1.  Law  Charges 

2.  Miscellaneous  Legal  Expenses 

3.  Supreme  Court  of  Judicature  and  Court  of  Crim- 
inal Appeal 

4.  Land  Registry 

5.  Public  Trustee 

6.  County  Courts 

7.  Police,  England  and  Wales 

8.  Prisons,  England  and  the  Colonies 

9.  Reformatory  and  Industrial  Schools,  Great  Britain 
10.  Criminal  Lunatic  Asylums,  England 

78 


ESTIMATES:    CHARACTER  AND  FORM 

Scotland 

11.  Law  Charges  and  Courts  of  Law 

12.  Scottish  Land  Court 

13.  Register  House,  Edinburgh 

14.  Prisons 

Ireland 

15.  Law  Charges  and  Criminal  Prosecutions 

1 6.  Supreme  Court  of  Judicature  and  other  Legal  De- 
partments 

17.  Land  Commission 

1 8.  County  Court,  Offices,  etc. 

19.  Dublin  Metropolitan  Police 

20.  Royal  Irish  Constabulary 

21.  Prisons 

22.  Reformatory  and  Industrial  Schools 

23.  Dundrem  Criminal  Lunatic  Asylum 

CLASS  IV.     EDUCATION,  SCIENCE  AND  ART 
United  Kingdom  and  England 

1.  Board  of  Education 

2.  British  Museum 

3.  National  Gallery 

4.  National  Portrait  Gallery 

5.  Wallace  Collection 

6.  Stafford  House 

7.  Scientific  Investigation,  etc. 

8.  Universities  and  Colleges,  Great  Britain,  and  Inter- 
mediate Education,  Wales 

Scotland 

9.  Public  Education 
10.  National  Galleries 

79 


BRITISH  FINANCIAL  ADMINISTRATION 


11.  Public  Education 

12.  Endowed  Schools  Commissioners 

13.  National  Gallery 

14.  Science  and  Art 

15.  Universities  and  Colleges,  Ireland 

CLASS  V.     FOREIGN  AND  COLONIAL  SERVICES 

1.  Diplomatic  and  Consular  Services 

2.  Colonial  Services 

3.  Telegraph  Subsidies  and  Pacific  Cable 

4.  Persian  Loan 

CLASS  VI.     NON-EFFECTIVE  AND  MISCELLANEOUS  SERVICES 

1.  Superannuation  and  Retired  Allowances 

2.  Miscellaneous  Expenses 

3.  Hospitals  and  Charities,  Ireland 

4.  Temporary  Commissions 

5.  Repayment  to  the  Local  Loan  Funds 

6.  Ireland  Development  Grant 

7.  International  Exhibitions 

8.  Repayment  to  the  Civil  Contingencies  Fund 

CLASS  VII.    OLD-AGE  PENSIONS,  LABOR  EXCHANGES,  INSUR- 
ANCE, ETC. 

1.  Old-Age  Pensions 

2.  National  Health  Insurance,  Joint  Committees 

3.  National  Health  Insurance  Commission,  England 

4.  National  Health  Insurance  Commission,  Wales 

5.  National  Health  Insurance  Commission,  Scotland 

6.  National  Health  Insurance  Commission,  Ireland 

7.  Labor  Exchanges  and  Unemployment  Insurance 

8.  National  Insurance  Audit  Department 

9.  Treatment  of  Tuberculosis  (Special  Grants) 

80 


ESTIMATES:    CHARACTER  AND  FORM 

10.  Highland  and  Inland  (Medical  Service) 

11.  Friendly  Societies' Deficiency 

12.  Expenses  under  the  Unemployed  Workmen's  Act 
(1905)- 

An  examination  of  this  list  of  appropriation  heads  brings  Facts  of 
out  a  number  of  facts  of  importance.  It  shows,  in  the  first  mp01 
place,  that  the  principle  of  classification  employed  is  that  of 
services  or  organization  units,  the  result  being  that  the  esti- 
mates and  appropriations  show  at  a  glance  the  amount  of 
money  required  for  operating  each  distinct  branch  of  the 
government  service.  In  the  second  place  it  shows  that  the 
policy  is  pursued  of  having  a  single  appropriation  for  each 
distinct  branch  of  the  government  service.  Another  feature 
of  interest  is  the  policy  of  distinguishing,  as  far  as  is  prac- 
ticable, between  appropriations  for  the  support  of  services 
for  the  United  Kingdom  and  England  and  those  for  Scotland 
and  Ireland.  Finally,  a  very  interesting  distinction  is  made 
between  appropriations  for  effective  and  so-called  "non-effec- 
tive" services,  the  latter  including  such  items  as  pensions, 
gratuities,  retired  pay,  etc. 

In  making  use  of  the  estimates  in  order  to  determine  the  Central- 
cost  of  particular  services  it  is  important  to  note  that  the  works  and 
amounts  appropriated  for  such  services  do  not  include  expendi-  °ffice.. 

Supplies 

tures  for  quarters  and  building  supplies,  nor  for  stationery, 
printing,  and  other  office  supplies,  these  being  provided  for 
in  the  appropriations  for  the  Office  of  Works  and  Public 
Buildings  and  the  Stationery  Office.  It  is,  however,  an  easy 
matter  to  get  at  the  expenditures  of  each  service  for  these 
purposes,  since  the  accounts  of  these  two  offices  show  the 
cost  of  the  services  or  materials  supplied  to  each  service.  More- 
over, in  the  report  of  the  Comptroller  and  Auditor  General 
on  appropriation  accounts  is  a  table  giving  the  cost  of  each 
service  that  is  borne  by  other  services,  so  that  the  total  cost 
of  each  service  can  be  seen.1 
1  See  p.  251. 

81 


BRITISH  FINANCIAL  ADMINISTRATION 

Appropriation  Subheads.     The  next  step  in  the  separation 
of  items  going  to  make  up  the  total  of  expenditures,  the  au- 
thorization which  is  requested,  is  that  of  allocating  to  cer- 
tain specified  subheads  the  total  amount  asked  for  under  each 
appropriation  head.     The  amounts  so  assigned  to  subheads 
differ  from  the  total  assigned  to  appropriation  heads  in  this 
important  respect:     The  sums  carried  by  the  appropriation 
heads  are  true  appropriations  in  that,  with  the  exception  of  the 
Army  and  Navy  votes,  they  cannot  be  exceeded  unless  special 
authority  therefor  is  secured  from  Parliament ;  the  sums  allo- 
cated to  subheads,  on  the  other  hand,  are  in  the  nature  of 
a  provisional  allotment  of  the  sums  voted,  since  amounts  car- 
ried under  one  head  may  be  transferred  to  another  head  if 
the  sanction  of  the  Treasury  to  such  action  is  obtained.    How- 
ever, in  granting  this  freedom  to  the  Executive  to  use  sur- 
pluses under  one  subhead  for  the  purpose  of  meeting  deficits 
under  another,  Parliament  requires  a  rigid  accounting  of  the 
manner  in  which  this  discretion  is  used.     Technically  these 
subheads  are  denominated  as  "Subheads  under  which  votes 
must  be  accounted   for  to  Parliament."     This  means  that, 
though  there  is  a  single  appropriation  for  a  service,  the  ac- 
counts must  be  kept  by  subheads,  in  which  of  course  will  ap- 
pear all  transfers  effected.     It  is   furthermore  the  duty  of 
the  Comptroller  and  Auditor  General,  in  rendering  his  re- 
port on  appropriation  accounts,  to  frame  it  so  as  to  show 
audited  expenditures  according  to  these  subheads,  and  spe- 
cially to  call  attention  to  all  cases  where  in  his  opinion  im- 
proper use  has  been  made  of  this  power  of  virement,  as  the 
expression  is. 

By  way  of  exception,  this  power  to  make  transfers  from 
one  subhead  to  another  is,  in  the  case  of  the  Army  and  Navy 
votes,  extended  to  the  votes  themselves.  The  latter  thus  in 
effect  have  practically  the  same  appropriation  status  as  sub- 
heads. This  exception  has  been  made  in  order  to  give  to 
these  two  great  departments  a  greater  facility  to  meet  emer- 
gencies as  they  arise. 

82 


ESTIMATES:    CHARACTER  AND  FORM 

It  is  hardly  necessary  for  us  to  point  out  the  importance  Administra- 
of  this  distinction  between  appropriation  heads,  or  votes,  Cance  of 
and  subheads.  It  introduces  an  elasticity  in  the  utilization  of  Practice 
the  funds  granted  that  would  be  lacking  were  the  sums  as- 
signed to  the  subheads  treated  as  definite  appropriations.  Not- 
withstanding these  manifest  advantages  from  an  adminis- 
trative standpoint,  the  system  is  one  which  has  not  passed 
unchallenged.  In  a  paper  submitted  to  the  Select  Committee 
on  National  Expenditure  of  1902, l  Mr.  T.  Gibson  Bowles 
vigorously  attacked  the  system  of  allowing  transfers  between 
Army  and  Navy  votes.  Though  his  criticism  is  directed  spe- 
cially to  this  practice,  much  of  his  reasoning  applies  equally 
to  the  practice  of  permitting  transfers  between  subheads.  The 
importance  of  the  principle  here  involved  warrants  our  repro- 
duction of  the  more  important  passages  of  Mr.  Bowies'  paper. 
He  says : 

"Under  a  usual  clause  in  the  Appropriation  Acts  since 
1862,  the  Treasury  is  empowered,  in  the  case  of  the 
Army  and  Navy  Votes,  to  authorise  the  departments  to 
apply  any  savings  that  may  be  made  on  one  Vote  towards 
any  other  Vote  of  the  same  department  in  which  an 
excess  of  expenditure  has  occurred.  This  system  of 
applying  the  surplus  of  one  Vote  to  meet  the  deficiency 
of  another  palpably  amounts  to  a  defeat  of  the  appropria- 
tion made  by  the  Act,  inasmuch  as  it  diverts  to  one  Vote 
the  money  appropriated  by  the  Act  to  another.  It  as 
palpably  tends  to  the  presentation  of  incorrect  estimates. 
It  is  also  calculated  to  prevent  the  due  surrender  of  unex- 
pended balances,  by  allowing  of  their  application  to  other 
purposes;  and  it  tends  to  the  allowance  of  delay  in  ren- 
dering the  year's  accounts  and  the  postponement  of  bring- 
ing into  account  all  such  excesses  as  are  not  capable  of 
being  met  out  of  surpluses  on  the  other  Votes,  as  well  as 

1  Report  of  Select  Committee  on  National  Expenditure  (1902),  Ap- 
pendix No.  8,  p.  213. 

83 


BRITISH  FINANCIAL  ADMINISTRATION 

to  the  postponement  of  actual  payments  properly  charge- 
able to  the  year.    And  it  must  encourage  the  department 
to  regard  the  total  sum  voted  in  respect  of  its  services  as 
one  huge  pooled  fund  into  which  it  may  dip  at  its  own 
discretion,  and  irrespective  of  the  specific  appropriation, 
for  any  extra  expenditure  whatever,  provided  the  total 
fund  be  not  exceeded.     It  would  seem  that  the  Treasury 
has  forgotten  that  an  excess  is  a  financial  offence,  and 
has  come  to  a  practice  of  authorising  this  diversion  from 
one  Vote  to  another  of  the  sums  granted,  almost  as  a 
matter  of  course;  and  although  the  subsequent  sanction 
of  Parliament  to  the  excess  of  expenditure  over  the  au- 
thorised expenditure  has  to  be  obtained  in  such  cases  that 
will  seem  a  very  insufficient  safeguard  to  those  who  know 
how  ready  Parliament  is  to  sanction  the  accomplished, 
fact.  .  .  .  The  tendency  bred  by  the  easy  diversion  of 
savings  to  excesses  must  be  to  encourage  incorrect  esti- 
mates, and  to  suggest  a  general  overestimate  in  order 
that  there  may  be  in  the  general  pooled  fund  of  the  de- 
partment as  large  a  balance  as  may  be  to  move  about 
from  one  Vote  to  another.    The  diversions  of  appropria- 
tion thus  affected  by  Treasury  allowance  are,  it  is  true, 
submitted  to  the  House  of  Commons  for  its  sanction,  but 
this  is  done  usually  at  the  very  close  of  the  next  year's 
session,  the  sanction  is  treated  as  a  mere  matter  of  for- 
mality, is  hurriedly  and  summarily  debated,  and  is  asked 
for  in  one  resolution  for  each  of  the  two  services,  cover- 
ing in  each  instance  all  the  diversions  made,  a  method 
which  affords  no  adequate  opportunity  of  putting  any 
sufficient  check  upon  a  growing  and  dangerous  diversion 
of  public  funds  from  their  allotted  purposes.     The  sys- 
tem of  diversion  of  the  moneys  voted  for,  and  appro- 
priated solely  to  one  purpose,  to  other  and  different  pur- 
poses is  one  which  seems  for  the  reasons  above  cited  to 
demand  jealous  watch  by  the  Treasury  of  Departments, 
and  by  the  Public  Accounts  Committee  of  the  Treasury." 

84 


ESTIMATES:    CHARACTER  AND  FORM 

To  the  commission  it  would  appear  that,  though  all  the 
dangers  mentioned  by  the  author  of  the  criticism  above  re- 
produced are  undoubtedly  present,  indeed  are  inherent  in  the 
system,  much  can  be  said  on  the  other  side.  In  the  first  place, 
if  a  department  has  not  the  faculty  of  making  use  of  any  Another 
savings  that  it  may  make  out  of  the  funds  allotted  to  a  par- 
ticular purpose,  but  must  surrender  all  such  surpluses  to  the 
General  Treasury,  all,  or  at  least  a  very  strong,  incentive  to 
economy  is  removed.  Two  of  the  authors  of  the  present  re- 
port were  at  one  time  heads  of  departments  in  the  govern- 
ment of  Porto  Rico,  where  this  faculty  of  making  transfers 
from  one  appropriation  subhead  to  another  existed.  They 
can  both  testify  that  this  possibility  of  making  use  of  realized 
surpluses  caused  them  to  make  every  possible  effort  to  squeeze 
out  savings  on  this  and  that  subhead  in  order  to  secure  funds 
to  supplement  appropriations  which  were  inadequate  for  the 
purposes  for  which  they  were  granted.  One  of  the  authors 
has  also  been  intimately  connected  with  the  executive  de- 
partment of  the  Federal  Government  at  Washington,  where 
this  power  of  utilizing  surpluses  did  not  obtain.  He  can  testify  American 
no  less  emphatically  that  there  the  whole  spirit  was  directly  cited  in 
the  contrary  to  that  which  prevailed  in  Porto  Rico.  Adminis- 
trators  felt  that  it  was  a  calamity  if  any  unexpended  balance 
of  an  appropriation  remained  at  the  end  of  the  year  for  sur- 
render to  the  Treasury.  As  the  end  of  the  year  approached 
the  condition  of  appropriation  balances  was  carefully  studied 
with  the  deliberate  purpose  of  seeing  how  all  the  money  avail- 
able could  be  used.  This  was  but  human  nature.  Any  money 
that  had  to  be  returned  to  the  Treasury  was  a  loss  to  the 
service  for  which  it  was  originally  appropriated.  It  is  thus 
a  mistake  to  assume  that  if  the  power  of  making  transfers  is 
withheld  the  Treasury  will  profit  to  any  appreciable  extent 
by  repayment  to  it  of  unexpended  balances  of  appropriations. 

Against  the  argument  that  the  power  to  make  transfers 
leads  the  departments  to  estimate  under  certain  heads  for 
larger  sums  than  will  be  required  in  order  that  a  surplus  may 

85 


BRITISH  FINANCIAL  ADMINISTRATION 


Sir  Edward 

Hamilton's 

View 


Elasticity 
Does  not 
Produce 
Control 


be  obtained  that  will  be  available  for  transfer  to  other  heads 
may  be  placed  the  argument  that  if  such  transfers  are  not 
permitted  the  departments  will  be  forced  to  estimate  on  the 
safe  side  for  all  items  of  appropriation.  Thus  Sir  Edward 
Hamilton,  in  a  paper  filed  with  the  Select  Committee  on  Na- 
tional Expenditure  (1902),  said: l 

"In  the  second  place,  the  absence  of  the  power  of  vire- 
ment  would  not  conduce  to  good  Administration.  To 
guard  against  the  risk  of  an  underestimate  on  each  sep- 
arate Vote  and  of  the  consequent  necessity  for  making  a 
supplementary  application  to  Parliament,  the  Naval  and 
Military  Departments  would  naturally  feel  bound  to 
estimate  each  Vote  more  liberally  than  they  do  now,  with 
the  result  that  their  aggregate  spending  power  would  be 
augmented.  It  not  infrequently  happens  that,  in  the 
course  of  the  year,  an  item  of  expenditure  is  sanctioned 
by  the  Treasury  conditionally,  that  is,  on  condition  that, 
if  an  excess  is  caused  on  the  Vote,  it  shall  be  met  out  of 
savings  on  other  Votes ;  and  the  result  is  that  savings  are 
effected  which  might  not  otherwise  be  effected.  I  sub- 
mit, therefore,  that  the  present  system  decidedly  makes 
for  economy  and  prevents  wasteful  expenditure." 

Finally  it  should  be  repeated  that  in  the  provisions  that  the 
transfers  can  take  place  only  upon  the  authority  of  the  Treas- 
ury; that  the  accounts  must  be  so  kept  and  rendered  as  to 
show  clearly  all  transfers;  that  these  transfers  must  be  re- 
ported to  the  House  of  Commons  and  that  those  transfers 
which  do  not  appear  to  have  been  properly  justified  must  be 
specially  commented  upon  by  the  Comptroller  and  Auditor 
General  in  his  report  and,  if  need  be,  be  further  examined  by 
the  Public  Accounts  Committee,  all  possible  safeguards  would 
seem  to  have  been  thrown  around  the  abuse  of  the  power  thus 
conferred  upon  the  expending  authorities. 

1  Report  of  the  Select  Committee  on  National  Expenditure  (1902), 
p.  225. 

86 


ESTIMATES :    CHARACTER  AND  FORM 

Turning  now  to  the  character  of  the  subheads  thus  provided 
for,  it  will  be  found  that  the  principle  followed  is  that  of 
distinguishing:  (i)  Between  the  subordinate  services  included 
under  the  more  comprehensive  organization  unit  for  which  Subheads 

r  °  .  Classified 

the  appropriation  is  made;  and  (2)  between  the  objects  of  by  Objects 
expenditure.  As  regards  the  second  of  these  divisions,  namely, 
that  concerning  the  objects  of  expenditure,  the  important  dis- 
tinctions are  those  between  expenditures  for  salaries  and 
wages,  for  traveling  and  incidental  expenses,  and  for  other 
special  categories  of  expenses.  The  specific  subheads  under 
which  an  accounting  must  be  made,  however,  vary  with  the 
different  services  according  to  their  character.  The  extent  to 
which  the  character  of  the  service  renders  it  feasible  to  specify 
expenditures  in  detail  seems  to  have  an  important  bearing  on 
the  number  and  variety  of  subheads  which  are  given  under 
the  different  votes.  There  is  no  distinction,  however,  in  prin- 
ciple, and  an  examination  of  any  one  of  the  important  votes 
will  show  the  general  character  of  subhead  classification.  The 
following  statement  of  the  manner  in  which  the  vote  for 
the  Home  Office  is  assigned  to  subheads,  reproduced  textually 
from  the  estimates  for  1914-1915,  furnishes  a  typical  illus- 
tration of  the  manner  in  which  this  problem  of  subheads  is 
handled : 


BRITISH  FINANCIAL  ADMINISTRATION 


HOME  OFFICE 

I.  Estimate  of  the  Amount  required  in  the  year  ending 
3 ist  March,  1915,  to  pay  the  salaries  and  expenses  of 
the  office  of  His  Majesty's  Secretary  of  State  for  the 
Home  Department  and  subordinate  offices. 

Two  Hundred  and  Sixty-eight  Thousand  and  Six  Hundred 

Pounds 

II.  Sub-heads  under  which  this  vote  will  be  accounted  for 
by  the  Home  Office. 


1914-5 

I9I3-4 

Increase 

Decrease 

Home  Office 
A.  Salaries,  Wages  and  Allowances 

£ 

5'?,O24 

£ 
51,221 

£ 
i.  80^ 

£ 

B.  Traveling  and  Incidental  Ex- 
penses   

7OO 

700 

C.  Special  Services  

3,OOO 

•*,5OO 

500 

Inspection  of  Factories  and  Workshops 
(i  Edw.  7,  c.  22) 
D.  Salaries  and  Allowances  

77.IQ7 

75.180 

2.OI7 

E.  Traveling  and  Incidental  Ex- 
penses   

I7.5OO 

16,500 

I,OOO 

F.  Fees  to  Surgeons,  etc  

I3.5OO 

12,500 

I,OOO 

G.  Costs  of  Prosecutions,  Inquiries 
and  Arbitrations  

•*.OOO 

1.5OO 

500 

Inspection  of  Explosives 
(38  Viet.,  c.  17  and  46  &  47  Viet.,  c. 
clxxxiv) 
H.  Salaries  and  Allowances  

3,180 

2,08l 

IOQ 

I.    Traveling  and  Incidental  Ex- 
penses   

1,000 

I,OOO 

K.  Fees  and  Expenses  of  Chemical 
Referees  

I,IOO 

I,IOO 

L.  Cost  of  Inquiries  and  Arbitra- 
tions   

c 

5 

Inspection  of  Mines  and  Quarries 
(3S&36  Viet.,  c.  77:50  &  51  Vict.,c. 

4O3 

46:57&58  Viet.,  c.  42;  and  i  &2 
Geo.  5,  c.  50) 
M.  Salaries  and  Allowances  

•14..O76 

•t-t  677 

N.  Traveling  and  Incidental  Ex- 
penses   

18,650 

1  8  650 

O.  Costs  of  Inquiries,  Arbitrations, 
etc  ;  . 

7.4.75 

II  O55 

i  580 

88 


ESTIMATES:    CHARACTER  AND  FORM 


1914-5 

I9U-4 

Increase 

Decrease 

Board  for  Mining  Examinations 
(i  &  2  Geo.  5,  c.  50) 
P.  Salaries  

£ 
880 

£ 
700 

£ 
1  80 

£ 

Q.  Traveling  and  Incidental  Ex- 
penses   

6qo 

I.O7S 

•*8s 

Inspection  under  Cruelty  to  Animals 
Act 
(39  &  40  Viet.,  c.  77) 
R.  Salaries  

2,568 

1,978 

S9O 

S.   Traveling  and  Incidental  Ex- 
penses   

1550 

sso 

Inebriates  Acts,  1879  to  1898 
(42&43  Viet.,  c.  19;  51  &52  Viet.,  c. 
19;  6  1  &62  Viet.,  c.  60) 
T.  Salaries  

700 

7OO 

U.  Traveling  and  Incidental  Ex- 
penses 

ISO 

ISO 

V.  Contributions  to  Certified  In- 
ebriate Reformatories  

19,  SOO 

2O,5OO 

I,OOO 

W.  Maintenance  of  Criminal  Luna- 
tics transferred  from  Certi- 
fied Inebriate  Reformatories 
to  Local  Asylums.  . 

600 

6OO 

Workmen's  Compensation  Act,  1906 
(6  Edw.  7,  c.  58) 
X.  Fees  and  Expenses  for  Medical 
Referees,  etc  ... 

7.OOO 

8,OOO 

1,000 

Aliens  Act,  1905 
(5  Edw.  7,  c.  13) 
Y.  Salaries,  Fees  and  Allowances 
to  Officers 

IO.4.QO 

10,240 

2  SO 

Z.   Traveling  and  Incidental  Ex- 
penses   

3S5 

29S 

60 

AA.  Immigration  Boards:  Fees  oJ 
Members  and  Clerks 

850 

7  SO 

IOO 

BB    Expenses  of  Expulsion  Orders 

I.7SO 

I  7  SO 

Home  Office  Industrial  Museum 
CC.  Expenses  

I.OOO 

I,OOO 

Role  of  the  Baronetage 
DD.  Expenses  

no 

no 

GROSS  TOTAL  £ 

280,600 

279,96  •* 

7,602 

6,965 

Deduct 
EE.  Appropriations  in  Aid. 

I2.OOO 

12,'^SO 

35° 

NET  TOTAL  £ 

268,600 

267.61^ 

7,952 

6,965 

Net  Increase  £987 

89 


BRITISH  FINANCIAL  ADMINISTRATION 

Provision  is  also  made  as  follows  in  other  estimates  for 
expenditure  in  connection  with  this  service. 


1914-15 


Office  Accommodations  (Buildings,  Furniture,  Fuel  and  Light,  etc. 

(Class  I,  10) 

Surveys  (Class  I,  1 1) 

Rates  (Class  I,  14) 

Chemist,  Government  (Class  II,  13) 

Stationery  and  Printing  (Class  II,  24) 

Law  Charges,  Ireland  (Class  III,  15) 

Non-effective  (Class  VI,  i) 

Customs  and  Excise,  Revenue  Departments,  No.  I 

Post  Office  Revenue  Departments,  No.  3 

Consolidated  Fund:  Inspectors  of  Anatomy 


8,580 

2 

3,500 

550 

6.OOO 

150 

13,736 

50 

7,795 
600 


40,963 


Supporting  Details.  The  subheads,  which  in  the  tables 
given  are  indicated  by  the  letters  of  the  alphabet,  represent 
the  furthest  that  the  principle  of  either  appropriation  or  allot- 
ment to  particular  heads  is  carried.  They  do  not,  however, 
represent  the  greatest  itemization  of  data  contained  in  the 
estimates.  For  each  subhead  there  is  a  supporting  table  giv- 
ing the  details  making  up  the  totals  shown.  These  support- 
ing tables  are,  however,  purely  for  purposes  of  information. 
The  importance  of  this  supporting  detail  may  be  understood 
when  it  is  remembered  that  the  estimates  are  not  referred  to 
and  taken  up  in  a  standing  committee,  but  are  taken  up  one 
vote  after  another,  subhead  after  subhead,  in  committee  of 
the  whole  house,  usually  beginning  in  February  and  contin- 
uing till  every  item  has  been  covered.  And  it  must  also  be 
remembered  that  every  member  of  the  House  of  Commons 
must  go  on  record  before  his  constituency,  when  each  vote 
is  taken  in  committee  of  the  whole.  The  details,  therefore, 
are  matters  of  great  interest,  especially  to  the  Opposition, 
who  have  the  cabinet  officers  before  them  and  can  ask  them 
any  question  concerning  which  information  is  desired.  In 
a  table  supporting  the  subhead  "Salaries  and  Wages"  are 

90 


ESTIMATES:    CHARACTER  AND  FORM 

listed  the  titles,  number,  and  salaries  of  all  employees  to  be 
provided  for.  Thus  for  the  subhead  "M"  in  the  vote  for  the 
Home  Office,  reproduced  above,  there  is  given  the  following 
table. 


INSPECTION  OF  COAL  AND  METALLIFEROUS  MINES  AND  OF 

QUARRIES 

(35  &  36  Viet,  c.  77 ;  50  &  5 1  Viet.,  c.  46 ;  57  &  58  Viet,  c.  42 ; 
i  &  2  Geo.  V,  c.  50) 

M.     Salaries  and  Allowances 


Numbers 

Salary  of  Office 

I9I3-4 

I9I4-S 

Min- 
imum 

Annual 
Incre- 
ment 

Max- 
imum 

I9I4-5 

I9I3-4 

i 
4 
IS 

i 

34 
i 
30 

6 
i 

i 
St 
14 
i 
33 
I 
30 

6 

i 

£. 
1,200 
750 
500 
500 
300 
300 

ISO 

£.    s. 
100  — 
50  — 
20  — 
20  — 
IS  — 
IS  — 

s  — 

£. 
1,500* 
1,000 
700 
700 
450 
400 

200 

£. 
1,500 
4,509 
8,646 
607 
11,846 
300 
4.704 

840 

2IO 

784 

117 
13 

£. 
1,500 
3,568 
9,367 
587 
1  1  ,909 
300 
4.596 

820 

140 
758 

us 
13 

Sub-Inspectors  

Allowances  to  Inspectors  for  cler- 

Allowance  to  Divisional  Inspec- 

Inspectors  of  Horses  

125 
So 

5  — 

2    IO 

175 

I2O 

53.  a  wk. 

Mechanic  at  the  Station  for  testing 

Allowance  to  Ditto  for  acting  as 
caretaker 

93         92  ||                                                                 Total  for  Salaries  £ 

34,076 

33,673 

*  Salary  to  be  reconsidered  on  a  vacancy. 

t  On  the  organization  of  the  Lancashire  and  North  Wales  Division  the  numbers  of  these 
posts  will  be  6  divisional  inspectors  and  13  senior  inspectors. 

J  Two  of  these  inspectors  retain  the  old  scale  of  salary,  viz. ,  600  £.  —  20  £.  —  800  £. 

||  The  inspectors  have  been  appointed  as  inspectors  of  factories  (without  additional  salary) 
to  enable  them  to  enforce  certain  provisions  of  the  Factory  and  Workshop  Acts  in  the  Pit  Banks, 
Metalliferous  Mines  and  Quarries. 

The  itemization  of  other  subheads  naturally  varies  with  Classifica- 
the  subheads  and  the  services  to  which  they  relate.    The  tables  with  Each 
given  below,  showing  the  supporting  tables  for  the  two  sub-  Service 
heads  under  the  caption  of  Inspector  of  Coal  and  Metalliferous 
Mines  and  of  Quarries,  indicate  the  extent  to  which  items  of 
this  character  are  detailed. 

91 


BRITISH  FINANCIAL  ADMINISTRATION 


From 

Summary  to 
Details 


N.     Traveling  and  Incidental  Expenses. 

1914-5 

1913-4 

Traveling  expenses  of  the  91  inspectors,  sub-inspectors, 
inspectors  of  horses  End  the  labor  advisers  

£ 
18,000 

£ 
18,000 

Newpapers  and  advertisements  

60 

7o 

Scientific  instruments  and  repairs  to  same  

so 

80 

Postage              .        

460 

420 

Repayment  to  mine  owners  and  coroners   of  cost  of 

60 

60 

Carriage  of  parcels  cost  of  photographs  and  sundries  

20 

20 

Total  for  Traveling  and  Incidental  Expenses  £ 

18,650 

18.650 

O.     Costs  of  Inquiries,  Arbitrations,  etc.  * 

1914-5 

1913-4 

I.  Legal  and  other  expenses  in  connection  with  inquests, 
inquiries,    and  arbitrations,  including  the  cost  of 
shorthand  notes,  and  court  fees,  etc.,  in  prosecutions 
conducted  by  inspectors  without  legal  aid  

£ 
1,000 

£ 
1,000 

2.  Testing  of  explosives!  ;  renewal  of  apparatus  and  pro- 
vision of  material  (45o£)  ;  fees  of  chemical  referees 
(<5o£)  and  incidental  expenses  (25£)   

525 

^75 

3.  Testing  of  safety  lamps:  cost  of  tests  

IOO 

^8O 

4.  Expenses  of  committee  appointed  by  the  Secretary  of 
State  to  carry  out  coal  dust  experiments  

4,500 

6,60O 

5.  Analyses  of  samples  of  mine  air  

1,250 

2,5OO 

6.  Fees,  etc.,  to  Veterinary  Surgeons  

IOO 

2OO 

Total  for  Costs  of  Inquiries  and  Arbitrations  ....  £ 

7,475 

11,055 

*  The  costs  of  prosecutions  and  appeals  conducted  by  the  Director  of  Public  Prosecutions 
or  the  Solicitor  to  the  Treasury  are  defrayed  out  of  the  Vote  for  Law  Charges,  Class  III,  I. 

t  The  fees  chargeable  for  testing  explosives  are  appropriated  in  aid  of  the  vote.  The 
amount  received  during  the  year  ended  September  30,  1913,  was  2,478£. 

The  fines  under  the  Coal  Mines  and  Metalliferous  Mines  Acts  are  payable  to  the  Ex- 
chequer, and  by  direction  of  the  Treasury  under  the  Act  I  &  2  Geo.  V.  c.  50,  s.  105,  those  in- 
flicted in  England  and  Wales  are  appropriated  in  aid  of  the  Home  Office  vote.  The  total 
amount  received  in  Great  Britain  during  the  year  ended  aoth  September,  1913,  was  £1,006  6s. 
i  id. 

Order  of  Presentation  of  Data.  The  foregoing  tables  show 
the  great  care  taken  by  the  Treasury  to  place  before  Parlia- 
ment the  details  of  proposed  expenditures  in  comparison  with 
the  figures  for  the  current  year.  Equally  noteworthy  is  the 
form  or  order  in  which  these  tables  are  given.  Each  of  the 
one  hundred  and  fifty-three  votes  constitutes  a  chapter  in  the 
book  of  estimates.  At  the  head  of  the  chapter  is  given  the 
total  amount  of  the  vote.  Next  follows  the  table  which  we 
have  reproduced  giving  the  subheads  under  which  all  account- 

92 


ESTIMATES:    CHARACTER  AND  FORM 

ing  for  the  vote  must  be  rendered  and  between  which,  as  has 
been  pointed  out,  transfers  may,  with  the  approval  of  the 
Treasury,  be  effected.  Then  follows  the  series  of  supporting 
tables.  The  principle  of  presentation  is  thus  the  correct  one 
of  proceeding  from  the  general  to  the  particular.  By  this 
scheme  of  presentation  significant  tables  are  brought  into  im- 
mediate juxtaposition  and  attention  is  not  distracted  by  de- 
tails. If  information  regarding  the  latter  is  desired  it  can, 
however,  be  easily  obtained  by  consulting  the  supporting  tables 
that  follow.  Especially  to  be  commended  is  the  series  of 
footnotes  having  the  purpose  of  explaining  any  change  of  im- 
portance or  of  presenting  other  data  explanatory  of  the  figures 
given.  Members  of  the  House  are  not  yet  at  the  end  of 
their  resources  in  these  details :  They  may  still  ask  questions 
of  administration  officers  on  the  floor  and  have  them  promptly 
answered. 

General  Summaries  and  Analysis.  In  the  foregoing  we 
have  been  considering  the  manner  in  which  the  details  of  the 
estimates  are  presented.  We  have  now  to  consider  the  steps 
that  have  been  taken  to  bring  these  details  together  into  gen- 
eral statements  and  to  compare  the  showings  then  made  with 
past  experience  to  the  end  that  the  purport  of  the  estimates 
as  a  whole  may  be  seen  by  the  legislator. 

We  have  seen  that  the  book  of  Estimates  proper  consists  in  Four 
of   153  chapters,   each  devoted  to  giving  the  subheads  and  Quarto 
supporting  data  regarding  a  single  vote.    These  chapters  are  Volumes 
assembled  in  four  volumes  embracing  respectively  the  esti- 
mates for  (i)  the  Army,  (2)  the  Navy,  (3)  the  Civil  Services, 
and  (4)  the  Revenue  Departments.    The  chapters  relating  to 
the  civil  services  are  first  issued  as  separate  pamphlets,  but 
are  afterwards  bound  up  in  a  single  volume  with  a  general 
index.     Each  of  these  four  volumes  is  provided  with  intro- 
ductory matter,  consisting  of :     ( i )  A  memorandum  explana-  Subdivisions 
tory  of  the  estimates;  (2)  an  abstract  of  the  estimates;  and  Volume 
(3)   a  comparison  of  the  estimates  with  actual  expenditure 

93 


BRITISH  FINANCIAL  ADMINISTRATION 

during  the  preceding  eight  years  and  grants  for  the  current 
year.    We  will  consider  each  of  these  in  turn. 

Curiously  enough,  the  memoranda  explanatory  of  the  esti- 
mates do  not  in  all  cases  appear  as  a  part  of  the  books  of 
Memoranda  estimates  to  which  they  relate.  The  memoranda  for  the  Army 
ofXEstimates  and  Navy  estimates  appear  as  separate  pamphlets,  those  for 
the  year  1914-1915  bearing  the  titles:  Army: — Memoran- 
dum of  the  Secretary  of  State  for  War  Relating  to  the  Army 
Estimates  for  1914-5,  and  Navy  Estimates  1914-5:  State- 
ment of  the  First  Lord  of  the  Admiralty  Explanatory  of  the 
Navy  Estimates  1914-5.  The  memoranda  for  the  civil  serv- 
ices and  the  revenue  departments  are  prepared  by  the  Finan- 
cial Secretary  of  the  Treasury  and  appear,  in  connection  with 
the  abstract  of  estimates  and  comparison  of  estimates  with  ex- 
penditures during  the  last  eight  years,  as  an  introductory  chap- 
ter to  the  volume  of  estimates  for  the  civil  services.  The  result 
of  this  illogical  practice  is  that  persons  desiring  to  consider 
the  Army  and  Navy  in  connection  with  the  estimates  them- 
selves must  provide  themselves  with  these  additional  pam- 
phlets, and  those  desiring  to  consider  the  memorandum  rela- 
tive to  the  estimates  for  the  revenue  departments  must  seek 
it  not  in  the  book  of  estimates  for  those  departments,  but 
in  the  book  of  estimates  for  the  civil  services. 

These  memoranda  are  exceedingly  brief;  those  for  the  1914- 
1915  estimates  comprising,  for  the  Army  6  pages,  for  the 
Navy  15  pages,  for  the  Civil  Services  9  pages,  and  for  the 
Revenue  Departments  one  page.  They  contain  little  more 
than  a  statement  of  changes  made  in  respect  to  the  grouping  of 
the  estimates  under  votes  and  subheads.  These  changes  are 
relatively  few;  still  at  times  votes  are  consolidated  or  one 
vote  broken  into  two  votes.  New  subheads  are  provided  for, 
etc.  Only  in  an  exceedingly  general  and  summary  way  do 
they  call  attention  to  and  comment  upon  features  in  respect 
to  which  the  estimates  depart  from  current  appropriations  as 
regards  the  amount  of  money  provided  for. 

Following  the  memorandum  for  the  book  of  estimates  for 

94 


ESTIMATES:    CHARACTER  AND  FORM 

the  civil  services,1  appear  two  tables  in  the  nature  of  a  general 
summary  of  the  estimates  in  comparison  with  appropriations 
for  the  current  year.  These  are  designated  as  abstracts  of  Abstracts  of 
estimates.  The  first  of  these  tables,  which  is  a  summary  of 
the  second,  gives  the  figures  according  to  the  seven  classes 
into  which  the  civil  services  are  divided.  The  second  gives 
the  same  data  according  to  the  120  votes,  and  in  addition  indi- 
cates for  each  vote  the  department  that  must  account  for  the 
vote  and  the  net  expenditure  for  the  completed  year.  In 
order  that  the  character  of  these  important  summaries  may 
be  clearly  seen  the  first  of  these  tables,  which  is  a  short  one, 
is  reproduced  in  full  on  page  96,  and  enough  of  the  second 
table  is  given  on  page  97  to  show  its  character. 

Following  the  two  tables  comparing  estimates  with  appro-  Comparison 
priations  for  the  current  year  are  two  tables  bringing  the  esti-  wjth  Ex- 
mates  into  comparison  with  actual  expenditures  during  the  pre-  Pendltures 
ceding  eight  years  and  grants  for  the  current  year.    The  first 
of  these  tables  gives  the  data  according  to  votes.     The  sec- 
ond is  in  the  nature  of  a  summary  of  the  first,  giving  the  fig- 
ures by  classes  only.     As  the  two  tables  have  precisely  the 
same  box  headings,  the  reproduction  of  the  second  table  on 
page  98  will  show  the  nature  of  both. 

Little  comment  is  required  regarding  these  tables  in  which 
the  estimates  are  recapitulated  and  brought  into  comparison 
with  past  expenditures  and  current  grants.     As  far  as  they 
go  it  is  difficult  to  see  how  the  form  of  presentation  could  be  Summaries 
improved  upon.     It  is  important  to  note,  however,  that  the   and. 
statements  do  not  carry  the  figures  beyond  the  vote;  that  is,   by  "Votes" 
the  180  main  heads  under  which  appropriations  are  made.    If 
one  desires  a  comparative  statement  by  subheads  reference 
must  be  had  to  the  estimates  themselves,  and  the  comparative 
statement  must  be  compiled.     In  view  of  the  fact  that  many 

1  In  what  follows  attention  is  concentrated  upon  the  estimates  for 
the  Civil  Services.  It  was  thought  that  no  useful  purpose  would  be 
served  in  attempting  to  describe  in  detail  the  Army  and  Navy  esti- 
mates. 

95 


BRITISH  FINANCIAL  ADMINISTRATION 


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98 


ESTIMATES:    CHARACTER  AND  FORM 

of  these  subheads  are  in  themselves  distinct  services  of  im- 
portance, as,  for  example,  Inspection  of  Mines  and  Quarries, 
etc.,  as  shown  in  the  table  giving  the  subheads  covered  by 
the  appropriation  for  the  Home  Office  which  we  have  repro- 
duced,1 it  would  seem  that  the  presentation  might  with  advan- 
tage be  carried  far  enough  to  show  the  figures  for  these  dis- 
tinct services. 

It  is  also  to  be  remarked  that  no  attempt  is  made  to  analyze 
the  estimates  from  other  than  the  vote  standpoint,  which,  as 
has  been  pointed  out,  corresponds  closely  to  the  principle  of 
classification  by  units  of  organization.  Neither  here  nor  else- 
where is  any  attempt  made  consistently  to  analyze  estimates 
or  expenditures  according  to  "objects  of  expenditure,"  that 
is,  the  things  purchased,  services,  materials,  etc. ;  or  accord- 
ing to  "character  of  expenditures,"  that  is,  capital  outlay, 
fixed  charges,  maintenance,  operation,  etc. ;  or  according  to 
function,  that  is,  the  nature  of  the  service  except  on  very  broad 
lines.  Each  of  these  distinctions  is  made;  there  is  a  con- 
sciousness of  their  importance,  but  no  basis  of  analysis  or 
classification  is  consistently  followed  in  the  summaries  or 
details. 

1  P.  91. 


A  Continu- 
ing Appro- 
priation of 
"Extra 
Receipts" 


CHAPTER   V 

THE  ESTIMATES:    APPROPRIATIONS  IN  AID 

Theory  of  Appropriations  in  Aid ;  Statement  of  Arguments  in  Favor 
of  the  System;  Criticism  of  the  System;  Contrast  with  American 
System  of  Reimbursable  Appropriations. 

In  the  tables  which  have  been  given,  reference  is  made  to 
what  are  called  "appropriations  in  aid" ;  and  through  them  to  a 
distinction  that  is  made  between  what  are  termed  "gross 
appropriations"  and  "net  appropriations."  This  feature  of 
the  estimate  and  appropriation  system  is  characteristic  of 
the  budgetary  system  of  Great  Britain.  It  is  one  which  af- 
fects not  only  the  question  of  appropriations,  but  the  whole 
scheme  of  public  accounting.  It  is  one,  moreover,  regarding 
the  advisability  of  which  opinion  is  widely  divided.  For  these 
reasons  the  commission  has  taken  especial  pains  to  inquire 
into  the  principles  upon  which  it  rests  and  the  results  that 
flow  from  it  in  practice. 

Theory  of  Appropriations  in  Aid.  By  "appropriations  in 
aid"  is  meant  the  appropriation  to  the  services  producing  them 
of  the  miscellaneous  revenues  or  "extra  receipts,"  as  they 
are  technically  called,  as  an  aid  or  addition  to  the  funds  appro- 
priated by  way  of  formal  grant  from  the  Consolidated  Fund. 
It  results  from  this  practice  that  the  several  services  or  groups 
of  services,  covered  by  a  vote,  receive  money  with  which  to 
meet  their  expenditures  in  two  ways:  (i)  By  authorization 
to  use  certain  of  their  extra  receipts,  for,  as  will  be  seen,  by 
no  means  all  extra  receipts  are  treated  as  appropriations  in 
aid;  and  (2)  by  grant  from  the  Consolidated  Fund.  The  lat- 
ter constitutes  the  net  appropriation,  and  the  two  together  con- 

100 


ESTIMATES:    APPROPRIATIONS  IN  AID 

stitute  the  gross  appropriation.  From  the  accounting  stand- 
point the  significant  feature  of  this  system  is  that  the  extra 
receipts  treated  as  appropriations  in  aid  do  not  pass  through 
the  General  Treasury  and  thus  do  not  figure  on  either  the 
receipt  or  the  issue  side  of  the  exchequer  accounts.  This 
does  not  mean  that  receipts  of  this  character  do  not  have 
to  be  rigidly  accounted  for.  It  signifies  only  that  they  are 
not  accounted  for  as  treasury  receipts  and  payments,  but  have 
a  special  accounting. 

According  to  this  system,  each  service  covered  by  a  vote 
in  submitting  its  estimates  is  required  to  estimate,  not  only  Amount  of 
the  total  sum  of  which  it  will  have  need  during  the  ensuing  Receipts" 
year,  but  the  income  that  it  expects  to  secure  in  the  way  of  Available 
"extra  receipts"  which  can  be  used  by  it  to  meet  such  needs. 
Parliament,  in  acting  upon  these  estimates,  then  proceeds  to 
appropriate  these  receipts  as  an  aid  to  the  vote  or  appropria- 
tion proper,  and  to  make  a  grant  of  funds  from  the  Consoli- 
dated Fund  to  meet  the  balance  of  the  estimated  requirements 
of  the  service.    The  amount  of  the  receipts  so  estimated  con- 
stitutes the  maximum  sum  that  may  be  used  in  this  way. 
Should  the  extra  receipts  exceed  the  amount  estimated  the 
excess  is  not  available  for  expenditure,  but  must  be  surren- 
dered to  the  Exchequer  as  a  miscellaneous  receipt  of  the  Con- 
solidated Fund. 

For  the  most  part  moneys  assigned  to  the  services  in  this 
way  represent  only  incidental  receipts,  as,  for  instance,  those 
derived  from  fees,  fines,  sale  of  property,  etc.    In  some  cases,   Character 
however,  they  are  of  importance  and  indeed  exceed  in  amount 


the  total  requirements  of  the  service.     This,  for  example,  is  propriated 

i        TI  *-•  i  •  .in  Aid 

the  case  in  respect  to  the  Mint,  where  estimated  receipts 
greatly  exceed  estimated  expenditures.  In  these  cases  the 
practice  is  to  appropriate  in  aid  only  so  much  of  the  receipts 
as  is  necessary  to  meet  estimated  expenditures,  the  balance  be- 
ing surrendered  to  the  Exchequer  as  miscellaneous  income.  In 
order  that  the  income  may  figure  in  the  estimates  calling  for 
a  grant,  or  appropriation  proper,  the  practice  is  followed  of 

161 


BRITISH  FINANCIAL  ADMINISTRATION 


A  "Token" 
or  "Nom- 
inal" Vote 


The  Prin- 
ciple of 
Financial 
Entity 


making  a  nominal  grant,  say,  of  £10  or  £100  for  the  service. 
This  is  in  order  that  the  estimate  for  the  service  may  tech- 
nically come  before  Parliament  for  consideration  and  dis- 
cussion. A  grant  of  this  character  is  termed  a  "token"  or 
"nominal"  vote.  Logically  it  would  seem  that  this  principle 
of  a  service  relying  primarily  upon  its  receipts  for  the  meet- 
ing of  its  expenditures  and  only  requesting  a  grant  from  the 
Consolidated  Fund  sufficient  in  amount  to  meet  any  deficiency 
in  its  receipts  to  cover  expenditures  would  apply  specially 
to  the  great  revenue  departments.  In  point  of  fact,  however, 
the  principle  is  not  extended  to  these  services.  Though,  as 
will  be  pointed  out  hereafter,1  the  revenue  departments  use 
the  money  received  by  them  in  paying  their  expenses,  this 
money  from  an  appropriation  and  accounting  standpoint  is 
treated  as  having  passed  through  the  Exchequer.  It  is  due 
-to  this  exception  that  the  term  "extra  receipts"  gets  its  special 
signification. 

The  principle  upon  which  this  system  rests  is  apparently 
that  each  service  shall,  as  far  as  possible,  be  treated  as  a  finan- 
cial entity — that  is,  that  each  service  be  given  a  financial 
personality;  that  the  income  derived  by  a  service  belongs 
primarily  to  it  and  should  be  devoted  to  meeting  its  expenses ; 
and  that  only  to  the  extent  to  which  it  is  unable  to  meet  its 
expenses  in  this  way  should  it  come  to  Parliament  with  a 
request  for  a  grant  of  funds  from  the  General  Treasury. 
Combined  with  this  feeing  is  also  the  desire  to  distinguish 
between  expenditures  which  are  met  by  service  receipts  and 
those  which  have  to  be  met  from  taxes  imposed  upon  the 
people.  Tacitly,  and  at  times  avowedly,  the  position  is  taken 
that  the  interest  of  Parliament  and  the  people  is  in  expendi- 
tures which  have  to  be  met  through  taxation,  and  that 
only  these  constitute  the  subject  matter  of  appropriations 
proper. 

In  its  present  form  this  system  was  established  in  1881  as 
the  result  of  certain  observations  contained  in  a  report  of  the 

1  P.  153- 

1 02 


ESTIMATES:    APPROPRIATIONS  IN  AID 

Public  Accounts  Committee  in  that  year.    It  is  now  regulated 
by  a  statute  passed  in 


Statement  of  Arguments  in  Favor  of  the  System.  The  mat- 
ter is  one  of  so  great  importance  that  the  commission  has 
felt  justified  in  attempting  to  set  forth  as  fully  as  possible  the  Reasons  for 
arguments  that  can  be  brought  forward  in  favor  of  this  sys-  the°Sys0tem 
tern.  For  this  purpose  the  commission  cannot  do  better  than 
reproduce  the  statement  of  the  reasons  leading  up  to  the  adop- 
tion of  the  system  and  the  arguments  that  can  be  adduced  in 
its  favor  as  presented  by  the  Public  Accounts  Committee  in 
a  special  report  that  it  made  on  this  subject  in  1894,  and  ap- 
proved by  a  treasury  minute  attached  to  it.2  Under  the  title 
"Application  of  Extra  Receipts  in  Aid  of  Gross  Estimated 
Expenditure,"  the  report  reads: 

A  question  has  been  raised  in  the  Committee  as  to  the 
expediency  of  reconsidering  the  practice  under  which  the 
Extra  Receipts  of  the  Departments  are  appropriated  in 
aid  of  the  Grants  of  Parliament  for  the  respective  Serv- 
ices; and  the  present  system  has  been  objected  to  on  the 
ground  that  it  tends  to  mislead  Parliament  as  regards  the 
total  expenditure  for  which  provision  is  made. 

The  question  of  the  mode  of  dealing  with  Extra  Re-   Conditions 

,  .  to  Be 

ceipts  was  under  departmental  inquiry  and  consideration.  Corrected 

for  many  years,  and  had  been  repeatedly  under  the  notice 
of  different  Committees  of  Public  Accounts  until,  finally, 
it  formed  the  subject  of  an  exhaustive  inquiry  by  the 
Public  Accounts  Committee  in  1881,  in  connection  with 
a  scheme  placed  before  the  Committee  by  the  Treasury  in 
their  Minute  of  27th  June,  1881.  In  this  Minute,  the 
Treasury  summarized  the  objections  to  the  then  existing 
practice  as  follows: 

1  Public  Accounts  and  Charges  Act,  54  and  55  Viet.,  c.  24,  s.  2. 

2  Epitome  of  the  Reports  from  the  Committee  of  Public  Accounts 
1857  to  1910  and  of  the  Treasury  Minutes  Thereon,  with  an  Index, 
pp.  354-355- 

103 


BRITISH  FINANCIAL  ADMINISTRATION 

1 i )  The  paying  of  a  large  proportion  of  these  receipts 
into  the  Exchequer,  and  the  consequent  voting  or 
revoting  of  the  expenditure  which  they  represent, 
have  the  effect  of  overstating  both  the  public  rev- 
enue and  expenditure,  or,  as  the  public  understand 
it,  the  taxation  of  the  country  and  the  cost  of 
Government,   by   a  sum  which  may  be  roughly 
stated  at  the  present  time  as  more  than  £4,0x30,000 
annually. 

(2)  The  departments  do  not  get  credit  for  their  re- 
ceipts and  have  not  therefore  inducement  to  real- 
ize them,  and  thus  reduce  to  the  utmost  the  net 
charge  of  Government  upon  the  taxpayers. 

(3)  Apart  from  these  objections  of  principle,  there  is 
also  the  objection   that,   under  present   practice, 
there  is  no  uniformity  or  consistency  among  the 
different  departments  in  their  method  of  treating 
extra  receipts. 

First  The  Committee  of  Public  Accounts  made  a  separate 

ArrmTand*  report  on  the  subject,  in  which,  with  the  concurrence  of 

Navy  the  then  Comptroller  and  Auditor  General,  they  approved 

the  adoption  of  the  Treasury  proposal  to  apply  the  new 
scheme  in  the  first  instance  to  the  extra  receipts  of  the 
Army  and  Navy,  which  they  remarked,  "though  making 
an  important  advance  in  the  right  direction,  must  be  con- 
sidered as  tentative,  and  not  as  a  final  settlement"  (see 
„  paragraph  4  of  Third  Report  1881).  The  Appendix  to 

the  Report  of  the  Committee  gives  the  fullest  informa- 
tion of  the  various  stages  of  the  discussion  upon  this 
question  of  the  inquiries  upon  which  this  scheme  was 
based  and  of  the  grounds  upon  which  the  expediency  of 
the  change  was  advocated. 

The  extension  of  the  system  to  the  Votes  for  Civil 
Services  has  only  been  effected  in  recent  years  by  a  grad- 
ual process  covering  first  one  vote  and  then  another,  as, 

104 


ESTIMATES:    APPROPRIATIONS  IN  AID 


for  instance,  the  Exchequer  and  Audit  Office  in  1883-84, 
the  Diplomatic  and  Consular  Services  in  1885-86.  In 
1892-93  there  was  a  large  extension  covering  39  votes 
(see  paragraph  5,  Comptroller  and  Auditor  General's 
Report).  But  there  remains  some  to  which  it  has  not  yet 
been  extended  (see  paragraph  5  above  cited).  In  1883 
the  Committee  stated  that  one  uniform  principle  should 
be  observed  throughout  the  services,  and  recommended 
a  gradual  extension  of  the  system  to  those  Civil  Service 
Votes  which  most  readily  admit  of  it  (see  Second  Report 
1883,  paragraph  2). 

The  change  of  practice,  which  originally  rested  upon 
directions  in  Treasury  Minutes,  has  received  the  stat- 
utory authority  contained  in  section  2  (3)  of  the  Public 
Accounts  and  Charges  Act  of  1891. 

It  is  clear,  therefore,  to  your  Committee  that  the  con- 
clusions arrived  at,  after  full  and  complete  inquiry,  by 
the  Public  Accounts  Committee  of  1881,  have  been  re- 
peatedly affirmed  or  practically  sustained  by  subsequent 
committees,  and  formally  approved  by  Parliament  itself 
in  the  recent  statute  above  quoted. 

It  is  further  to  be  observed  that  the  system  in  question 
does  not  appear  to  your  Committee  essentially  to  weaken 
the  control  of  Parliament  over  the  total  expenditure,  or 
affect  the  functions  of  the  Comptroller  and  Auditor  Gen- 
eral in  his  examination  and  criticism  of  that  expenditure. 
The  gross  expenditure  and  the  appropriations  in  aid  are 
both  shown  in  the  Estimates  and  can  be  criticized  in 
detail  before  the  vote  is  taken.  If  the  expected  receipts 
should  exceed  the  estimated  expenditure  when  the  esti- 
mate is  framed,  then  only  so  much  of  them  is  proposed 
for  appropriation  as  may  leave  a  nominal  balance  of  ex- 
penditure to  be  voted,  in  order  that  the  estimate  may 
come  under  parliamentary  review.  In  that  case  the  over- 
appropriation  remainder  would  be  paid  into  the  Ex- 
chequer. 

105 


Gradual 
Adoption 
for  the  Civil 
Services 


Frequently 
Reviewed, 
and 
Confirmed 


Does  not 
Weaken 
Parliamen- 
tary 
Control 


BRITISH  FINANCIAL  ADMINISTRATION 


Committee 
Recommends 
Continuation 
of  Practice 


Analysis  of 

Reasons 

Favoring 


In  these  circumstances  your  Committee  are  not  of 
opinion  that  any  reconsideration  of  the  practice  is  at 
present  called  for,  more  especially  in  view  of  the  pro- 
posed changes  in  the  appropriation  acts  dealt  with  in 
paragraph  8  of  the  Third  Report  of  your  Committee, 
which  have  been  recommended  for  the  purpose  of 
strengthening  the  control  of  Parliament  in  regard  to  the 
appropriation  of  the  moneys  in  question. 

The  Treasury  Minute,  attached  to  this  report  of  the  Com- 
mittee on  Public  Accounts,  reads : 

T.  M.  15/12/94. — My  Lords  are  glad  to  note  that  the 
Committee  do  not  recommend,  as  a  result  of  their  con- 
sideration of  the  subject,  any  modification  of  the  existing 
system,  as  regards  the  mode  of  appropriating  receipts  in 
aid  of  voted  expenditure.  They  would  strongly  depre- 
cate the  reopening  of  a  question  which  formed  the  subr 
ject  of  exhaustive  inquiry  and  consideration  some  few 
years  ago,  or  the  revising  of  a  system  with  the  working 
of  which  my  Lords  have  every  reason  to  be  satisfied. 

Criticism  of  the  System.  Notwithstanding  the  fact  that  this 
system  was  adopted  after  special  investigation  by  the  Com- 
mittee of  Public  Accounts  and  with  the  full  approval  of  the 
Treasury  and  Comptroller  and  Auditor  General;  received  the 
sanction  of  Parliament  itself  through  the  passage  in  1891 
of  an  act  authorizing  this  procedure;  was  reaffirmed  by  the 
Committee  of  Public  Accounts  and  the  Treasury  in  1894,  and 
has  been  tacitly  approved  by  the  Select  Committee  on  Na- 
tional Expenditure  in  1902  and  by  the  Select  Committee  on 
Estimates  in  1912,  the  commission  nevertheless  is  not  con- 
vinced that  it  is  based  on  a  sound  principle  of  accounting  or 
appropriation  of  funds. 

In  its  favor  the  main  argument  brought  forward  is  that 
it  avoids  an  overstatement  of  revenue  and  expenditures  and 
consequently  prevents  the  public  from  being  misled  in  respect 

106 


ESTIMATES:    APPROPRIATIONS  IN  AID 

to  what  are  the  real  income  and  cost  of  conducting  the  gov- 
ernment.   Thus,  to  take  an  example  given  by  Mr.  Higgs : x 

The  War  Office  receives  over  two  and  a  half  millions 
sterling  annually  from  the  Indian,  Colonial,  and  Egyp- 
tian Governments  for  expenditures  incurred  for  their 
benefit.  If  this  sum  were  paid  into  the  Exchequer,  and 
a  corresponding  amount  voted  as  expenditure,  both  the 
taxation  and  the  cost  of  government  would  appear  to  be 
larger  than  they  really  are. 

This  is  an  extreme  and  very  special  case  and  is  hardly  in 
the  category  of  extra  receipts,  properly  speaking.  But  even 
here  question  is  raised  as  to  the  force  of  the  argument.  It 
is  true  that  this  sum  represents  services  for  which  the  War 
Department  receives  remuneration  or  reimbursement  and  that 
the  expenditure  represented  by  it  does  not  have  to  be  met 
out  of  general  taxation.  The  money  none  the  less  represents 
an  activity  of  the  department — a  fact  which  is  lost  sight  of 
in  the  net  figures  of  the  accounts  and  estimates. 

Is  the  position  to  be  accepted  as  sound,  that  appropriations    Raises 
should  cover  only  grants  of  money  to  be  met  out  of  the  pro-   as""110" 
ceeds  of  taxation  or  burdens  imposed  upon  the  taxpayers  in  Budgetary 
some  other  form  ?    Is  this  to  be  accepted  as  correct  budgetary 
practice?     Should  not  estimates,  appropriation  and  treasury 
accounts  cover  all  the  operations  of  the  Government?    Is  there 
not  apparent  confusion  of  ideas  in  the  British  system  in  re- 
spect to  the  cost  of  operating  the  Government  and  the  net 
cost  to  the  taxpayers?    The  latter  fact  is  one  that  it  is  very 
important  to  have  clearly  shown,  but  this  can  readily  be  done 
by  a  proper  classification  of  government  income  and  expendi- 
ture.    It  is  certainly  desirable  that  the  income  received  by 
a  service  should  be  considered  at  the  same  time  that  the  mat- 
ter of  making  provision  for  its  expenditures  is  under  consid- 

1  Henry  Higgs :  The  Financial  System  of  the  United  Kingdom, 
p.  II. 

107 


BRITISH  FINANCIAL  ADMINISTRATION 


Not  the 
Way  to 
Promote 
Efficiency 


A  Funda- 
mental 
Objection 


eration.  This  could,  however,  be  easily  secured  by  requiring 
the  services  to  submit  statements  of  their  income  in  connection 
with  their  estimates  for  expenditures  in  much  the  same  way 
that  they  are  now  required  to  do.  This  being  done,  would  it 
not  be  better  to  treat  these  statements  of  income  purely  as 
explanatory  data  on  the  expenditure  side  than  have  the 
amounts  also  appear  on  the  revenue  side,  and  bring  out  the 
same  net  requirements  to  be  met  by  taxation  as  at  present? 
Would  not  this  give  a  more  accurate  and  complete  picture  of 
the  finances?  These  are  questions  that  are  fairly  raised 
against  the  present  practice. 

The  further  contention  is  made  that  this  system  tends  to 
stimulate  the  departments  in  their  efforts  to  secure  the  maxi- 
mum revenue  possible  and  to  develop  increased  efficiency. 
The  one  contention  is  based  on  the  assumption  that  it  will  de- 
crease the  tax  rate  by  increased  returns  for  service ;  the  other 
is  that  it  may  prevent  waste.  The  commission  questions  the 
force  of  this  argument  also.  There  is  no  added  elasticity 
given,  no  added  inducement.  The  expenditures  of  the  serv- 
ices are  as  absolutely  limited  under  this  system  as  under  that 
of  gross  appropriations.  If  any  excess  of  receipts  over  esti- 
mates as  presented  in  the  estimates  is  received,  such  surplus 
cannot  be  used,  but  must  be  surrendered  to  the  Exchequer. 
If  the  estimated  amount  is  not  realized  the  services  have  a 
ground  for  submitting  a  supplementary  estimate,  and  this  in 
fact  is  the  reason  often  alleged  in  applying  to  the  Treasury 
to  sanction  a  transfer  or  in  calling  upon  Parliament  for  a  fur- 
ther grant  of  funds. 

The  really  fundamental  objection  urged  against  the  system, 
however,  is  that  it  complicates  enormously  the  problem  of 
making  a  consolidated  statement  of  the  income  and  expendi- 
tures of  the  Government.  The  moment  one  departs  from  the 
policy  of  rigidly  requiring  all  receipts  to  be  covered  into  the 
Treasury  and  of  having  all  expenditures  met  by  formal  ap- 
propriations to  be  paid  from  such  general  treasury  fund, 
trouble  is  encountered  in  making  such  a  statement.  In  the 

1 08 


ESTIMATES:    APPROPRIATIONS  IN  AID 

case  of  Great  Britain  the  evil  resulting  from  its  departure 
from  this  principle  is  a  real  one.  As  the  figures  regarding 
audited  receipts  and  expenditures  are  not  available  until  some 
time  after  a  fiscal  year  is  closed,  the  Chancellor  of  the  Ex- 
chequer makes  use  of  exchequer  receipts  and  issues  for  his 
budgetary  statements.  These,  moreover,  are  the  figures  con- 
tained in  the  "Finance  Accounts"  or  the  annual  report  of 
Government  receipts  and  expenditures,  the  document  which 
is  most  used  by  Parliament  and  by  the  general  public  in  their 
discussion  of  matters  of  national  finance.  But,  as  has  been 
pointed  out,  not  all  moneys  voted  as  appropriations  in  aid 
pass  through  the  Exchequer.  The  result  is  that  the  vital  dis- 
cussion of  problems  of  national  finance  takes  place  upon  fig- 

f      Statements 

ures  which  do  not  include  all  receipts  and  expenditures.  In  Difficult  to 
fact,  so  far  as  the  commission  is  able  to  discover,  no  com- 
plete statement  of  all  Government  receipts  and  expenditures 
is  anywhere  made,  and,  due  chiefly  to  this  system  of  appropria- 
tions in  aid,  it  is  doubtful  whether  such  a  statement  could  be 
prepared  without  great  difficulty,  if  at  all. 

What  has  so  far  been  said  in  criticism  of  this  system  applies 
to  the  principles  upon  which  it  is  based.  Were  these  princi- 
ples rigidly  and  consistently  adhered  to  something  might  be 
said  in  its  favor.  Unfortunately  this  is  not  the  case.  By 
no  means  all  incidental  receipts  of  the  spending  departments 
are  applied  to  meeting  their  expenditures  in  the  way  of  appro- 
priations in  aid.  There  are  many  classes  of  receipts,  which, 


on  account  of  their  amount,  their  casual  character,  or  for  some  Departed 
other  reason,  are  not  so  appropriated.  All  receipts  of  the  de- 
partments that  are  paid  through  the  affixing  and  canceling  of 
stamps  are  automatically  carried  into  the  Exchequer  and  thus 
are  not  available  for  appropriation  in  aid.  Finally,  there  are 
the  cases  where  receipts  exceed  estimates.  In  these  cases 
we  have  the  added  complication  of  part  of  the  receipts  from 
a  given  source  being  treated  as  an  appropriation  in  aid  and  part 
as  a  Treasury  receipt. 

These  theoretical  objections  do  not  seem  to  be  overcome  in 

109 


BRITISH  FINANCIAL  ADMINISTRATION 

inconsistent,    practice ;  in  fact,  study  of  the  system  in  operation  confirms  the 

Nlogics  conclusion  that    it  is  inconsistent,   illogical  and  misleading. 

Misleading     Many  of  the  seeming  inconsistencies  have  been  pointed  out. 

Among  those  who  have  attacked  the  system  is  Mr.  Harold 

Cox,1  from  whose  criticism  the  following  is  taken : 

In  the  annual  estimates  presented  to  Parliament  ab- 
solutely no  attempt  at  consistency  is  made.  The  same 
department  will  treat  some  receipts  as  Appropriations  in 
Aid  of  expenditure;  others,  identical  in  character,  are 
treated  as  additions  to  revenue.  A  few  examples  will 
enable  the  reader  to  better  appreciate  the  hopeless  con- 
fusion which  exists  in  the  only  accounts  formally  pre- 
sented to  the  House  of  Commons. 

Take  this  striking  fact  that  the  sum  to  be  voted  by  the 
House  of  Commons  for  the  salaries  and  expenses  of  the 
Statement  Supreme  Court  of  Judicature  in  the  current  year  is 

£339,867;  whereas  the  sum  to  be  voted  for  the  salaries 
and  expenses  of  the  County  Courts  is  only  £5.  The  ex- 
planation is  that  the  fees  paid  into  the  High  Court  are 
treated  as  revenue,  whereas  exactly  similar  fees  paid  into 
the  County  Courts  are  treated  as  an  Appropriation  in 
Aid.  Absolutely  no  reason  exists  for  this  difference  of 
treating  two  sets  of  Court  fees.  The  real  cost  of  the 
County  Courts  is  not  £5,  but  £496,547  plus  the  sum 
charged  upon  the  Consolidated  Fund  for  the  salaries  and 
pensions  of  County  Court  Judges,  plus  various  payments 
charged  to  other  departments.  Nor  is  the  treatment  of 
the  County  Court  fees  consistent  even  with  itself,  for  a 
footnote  to  the  estimates  explains  that,  in  addition  to  the 
sum  of  £496,547  treated  as  an  Appropriation  in  Aid,  a 
sum  of  £4,458  is  estimated  to  be  received  in  cash  and  to 
be  paid  into  the  National  Revenue,  and  that  further 

1  Official  Finance  in  Government  Departments :    Financial  Review 
of  Reviews,  London  (1913), .pp.  47~49- 

IIO 


ESTIMATES:    APPROPRIATIONS  IN  AID 

amounts  estimated  at  £36,829  in  stamps  and  £450  in  cash 
will  also  be  received  through  the  County  Courts  and 
added  to  the  revenue. 

These  grotesque  inconsistencies  are  not  confined  to 
large  sums  which  can  easily  be  spotted.  They  run 
through  the  whole  system.  Here  are  a  few  examples, 
obtained  by  comparing  the  figures  given  in  the  "Finance 
Accounts"  for  1906-7  with  the  figures  published  in  the 
Volume  of  Estimates  applying  to  that  year.  The  Crim- 
inal Lunatic  Asylum  at  Broadmoor  receives  £50  a  year 
as  rent  from  the  Berkshire  County  Council  for  certain 
school  buildings;  it  also  receives  rents  for  various  cot- 
tages and  other  sundry  receipts  amounting  to  £165.  The 
first  of  these  items  is  treated  as  part  of  the  National 
Revenue  and  is  so  entered  in  the  Exchequer  Accounts; 
the  second  is  treated  as  an  offset  against  expenditure,  and 
is  entered  as  an  Appropriation  in  Aid.  The  British  Mu- 
seum receives  £2,300  from  the  sale  of  publications.  This 
is  treated  as  an  Appropriation  in  Aid.  On  the  other 
hand,  the  National  Portrait  Gallery  receives  £16  us.  5d. 
commission  on  the  sale  of  photographs.  This  is  treated 
as  an  item  of  National  Revenue.  Fees  for  admission  to 
the  Tower  of  London  are  treated  as  an  Appropriation  in 
Aid.  Fees  for  Admission  to  the  National  Portrait  Gal- 
lery and  to  the  National  Gallery  of  Ireland  are  treated 
as  National  Revenue.  .  .  . 

The  Post  Office  Estimates,  as  presented  to  Parliament, 
show  an  item  of  £1,189,000  for  the  cost  of  conveying 
"mails"  by  railway  in  the  year  1906-7.  The  "Finance 
Accounts"  for  the  same  year,  which  are  not  published 
until  after  the  year  has  closed,  show  that  in  addition  to 
this  sum  the  Post  OfBce  paid  to  the  railways  no  less  than 
£1,032,000  for  the  conveyance  of  "parcels."  This  second 
item  is  treated  as  a  deduction  from  the  receipts  of  the 
Post  Office,  and  no  mention  whatever  is  made  of  it  in  the 
Estimates  submitted  to  Parliament. 

in 


BRITISH  FINANCIAL  ADMINISTRATION 


Two 

Classes  of 
Expendi- 
tures to 
Which 
Applicable 


A  Reim- 
bursable 
Fund 


Mr.  Cox  points  to  what  he  considers  many  other  equally 
glaring  examples  of  inconsistency  in  the  operation  of  the  sys- 
tem of  appropriations  in  aid.  We  have  given  sufficient,  how- 
ever, to  show  how  defective  this  system  is  held  to  be  by  its 
critics,  and  how  greatly  it  is  held  to  complicate  the  problem  of 
determining  the  true  revenues  and  expenditures  of  the  Gov- 
ernment. Certain  of  these  objections  could  easily  be  over- 
come; others,  if  accepted  as  such,  are  inherent  in  the  system 
itself — as,  for  example,  where  receipts  treated  as  appropria- 
tions in  aid  exceed  in  amount  the  cost  of  the  services  and  the 
surplus  has  to  be  turned  into  the  Treasury,  and  when  the  extra 
receipts  are  paid  in  through  the  affixing  and  canceling  of 
stamps. 

Contrast  with  American  System  of  Reimbursable  Appro- 
priations. To  the  commission  there  would  seem  to  be  but 
two  classes  of  receipts  and  expenditures  to  which  this  system 
of  appropriations  in  aid  properly  applies,  and  as  regards  them 
a  much  better  system  of  handling  them  is  followed  in  Amer- 
ica. The  first  case  consists  of  the  receipts  and  expenditures 
that  are  entailed  in  operating  a  commissariat,  supply  or  other 
analogous  enterprises  for  the  use  of  employees  or  the  public. 
Reflection  will  show  that  receipts  and  expenditures  produced 
through  services  of  this  character  are  not,  properly  speaking, 
either  a  government  revenue  or  an  expense,  but  only  a  change 
in  the  form  of  the  resource  which  may  still  be  held  as  a  fund. 
It  would  entail  a  large  amount  of  unnecessary  trouble  and 
accounting  if  all  moneys  received  in  this  way  were  carried 
into  the  Treasury  and  all  expenditures  for  such  a  purpose  were 
met  through  formal  appropriations.  The  continuing  exchange 
of  cash  for  goods,  the  goods  for  cash  without  profit  or  loss 
adds  nothing  to  income  or  expense.  To  treat  these  exchanges 
as  income  and  expense  would  be  quite  misleading;  it  is  quite 
as  useless  to  go  through  a  different  funding  operation  every 
time  a  stock  which  is  intended  for  such  use  is  turned  over. 
The  first  practice  would  result  in  unduly  swelling  both  the 

112 


ESTIMATES:    APPROPRIATIONS  IN  AID 

income  and  expenses.  The  second  would  put  an  unnecessary 
limitation  on  the  service  with  no  added  control.  The  prac- 
tice which  is  best  adapted  to  such  a  purpose  is  to  treat  the 
appropriation  as  an  impounded  fund,  to  be  operated  on  the 
theory  that  there  will  be  no  surplus  or  deficit.  Or  if  there  is 
a  small  balance  of  gain  or  loss  on  one  side  or  the  other,  this 
is  the  only  sum  that  really  affects  the  Government  income  and 
expenses.  To  this  class  may  be  assimilated  all  industrial  or 
productive  enterprises  such  as  the  operation  of  a  postal,  tele- 
graphic or  telephonic  system,  though  here  the  operations  are 
of  such  a  varied  character  and  the  nature  of  the  administrative 
machinery  that  has  to  be  provided  for  their  performance  is  so 
complex  that  there  are  strong  reasons  for  making  other  special 
provision  for  the  management  of  their  financial  affairs. 

The  second  class  is  represented  by  the  receipts  derived  from 
the  sale  of  materials,  supplies  and  equipment  no  longer  needed 
by  the  administrative  departments.  It  is  evident  that  if  the 
receipts  from  sales  of  this  character  are  carried  into  the  Treas-  Proceeds 

.  ,.  .         ,  .     .          from  Sales 

ury  as  a  miscellaneous  receipt  and  an  additional  appropriation 
is  made  for  the  purchase  of  new  materials,  supplies  and  equip- 
ment, the  total  cost  of  such  articles  will  appear  to  be  much 
greater  than  it  really  is.  Furthermore,  and  what  is  a  matter 
of  greater  importance,  the  treatment  of  receipts  of  this  char- 
acter in  this  way  destroys  in  large  part  any  incentive  upon  the 
services  to  secure  the  maximum  return  possible  for  such 
articles.  Cases  have  frequently  come  to  light  where  services, 
knowing  that  they  would  not  profit  by  any  receipts  obtained  in 
this  way,  have  preferred  to  destroy  them  rather  than  go  to 
the  trouble  of  effecting  their  sale  and  accounting  for  the  pro- 
ceeds. 

In  the  United  States  cases  like  the  above  are  frequently, 
though  by  no  means  invariably,  met  by  the  employment  of 
what  are  known  as  "reimbursable"  appropriations.  Under 
this  system  provision  is  made  that  all  receipts  of  this  charac- 
ter shall  be  credited  to  the  original  appropriation  from  which 
payments  were  made  for  the  purchase  of  the  articles  sold  or 


BRITISH  FINANCIAL  ADMINISTRATION 

for  the  performance  of  the  service  rendered.  It  is  unneces- 
sary to  say  that  all  such  receipts  and  expenditures  must  be 
duly  accounted  for  in  the  same  way  as  are  other  receipts  and 
expenditures. 

In  the  opinion  of  the  commission  this  system  serves  the 
English  end  sought  for  and  in  a  better  way  than  the  British  system 
tions^^Aid  °f  appropriations  in  aid.  Furthermore  it  is  applied  only  in 
£?  N.ot.  those  cases  where,  as  has  been  pointed  out,  there  is  special 

Discriminate    ».-..-  .  ' 

justification  for  an  exceptional  procedure.  The  British  sys- 
tem makes  no  such  distinction,  but  applies  its  system  to  extra 
or  miscellaneous  receipts  generally.1 

1  This  question  of  appropriations  in  aid  and  of  "interceptions"  gen- 
erally— that  is,  of  permitting  certain  receipts  to  be  disbursed  without 
passing  through  the  Exchequer — is  handled,  but  not  in  a  very  satis- 
factory way,  in  two  papers  filed  with  the  Select  Committee  on  Na- 
tional Expenditure  (1902)  and  presented  by  it  as  appendices  to  its 
report.  The  first,  by  Mr.  T.  Gibson  Bowles,  is  an  attack  on  the  sys- 
tem, and  the  second,  by  Sir  Edward  Hamilton,  a  defense.  The  latter 
was  written  as  a  reply  to  the  former.  See  Report  of  the  Select  Com- 
mittee on  National  Expenditure  (1902),  pp.  212-214  and  223-227. 


CHAPTER  VI 

THE  ESTIMATES :   ACTION  UPON  THEM  IN  PAR- 
LIAMENT 

Financial  Powers  of  Parliament  Now  Vested  Wholly  in  the  House 
of  Commons;  Rules  of  Procedure  Governing  the  Consideration  of 
Estimates  in  the  House  of  Commons;  Distinction  between  the 
Authorization  of  Expenditures  and  the  Appropriation  of  Funds; 
Votes  on  Account;  Excess  Votes;  Votes  of  Credit;  Appropriation 
Acts;  Extent  of  Control  Over  Appropriations  Actually  Exercised 
by  the  House  of  Commons;  Establishment  in  1912  of  the  Select 
Committee  on  Estimates. 

With  the  Estimates  and  their  supporting  data  formulated 
and  laid  before  Parliament,  the  next  step  in  the  chain  of  opera- 
tions for  financing  the  Government  is  the  action  had  upon 
them  by  that  body.  Here  we  are  interested  in  two  things: 
( i )  The  procedure  employed  by  Parliament  in  performing  this 
part  of  its  duties;  and  (2)  the  determination  of  the  extent 
to  which  the  Parliament  exercises  the  power  which  it  legally 
possesses  of  modifying  the  proposals  so  brought  before  it  for 
consideration. 

Financial  Powers  of  Parliament  Now  Vested  Wholly  in 
the  House  of  Commons.    In  considering  this  matter  the  first 
point  to  be  noted  is  that  the  powers  of  the  two  houses  of  Par-   Contest 
liament  are  not  coordinate  as  regards  this  branch  of  their  du-   Lords^and 
ties.    This  has  been  true  almost  from  the  time  when  the  grand   Comra<>ns 
council  of  the  king  assumed  its  present  form  of  a  Parliament 
of  two  houses.     From  the  beginning  the  constitutional  rule 
has  been  that  to  the  House  of  Commons  belonged  the  pre- 
dominant role  of  initiating  all  finance  proposals,  the  House 
of  Lords  being  relegated  to  the  subordinate  position  of  a 
mere  approving  body. 


Lords  a 
Consenting 
Body  Only 


BRITISH  FINANCIAL  ADMINISTRATION 

Though  there  was  no  question  but  that  all  money  bills — that 
is,  bills  providing  for  the  imposition  of  taxes  or  the  appropria- 
tion of  funds — should  originate  in  the  Lower  House,  great 
uncertainty  existed  in  respect  to  the  powers  of  the  Lords  to 
amend  bills  of  that  character  coming  to  it  from  the  Commons. 
,It  is  not  our  intention  to  trace  the  long  struggle  between  the 
two  houses  growing  out  of  this  uncertainty  regarding  their 
powers  in  respect  to  matters  financial.  The  contest,  as  is  well 
known,  culminated  in  the  great  constitutional  crisis  brought 
about  by  the  rejection  by  the  House  of  Lords  of  the  Lloyd- 
George  Budget  of  1909,  a  crisis  which  was  solved  by  an  ap- 
peal to  the  country  through  the  dissolution  of  Parliament  and 
a  general  election.  Vindicated  in  its  contention  that  the 
House  of  Lords  should  not  have  the  power  to  modify  or  reject 
finance  proposals  sent  to  it  by  the  House  of  Commons,  the 
Ministry  introduced  and  finally  secured  the  passage  of  the 
famous  Parliament  Act  of  1911  1  by  which  practically  all 
power  over  money  bills  was  definitely  taken  away  from  the 
Upper  House. 

This  act  also  seriously  curtailed  the  powers  of  the  Lords  in 
respect  to  matters  of  general  legislation.  With  this  aspect 
of  the  act,  however,  we  are  not  here  interested.  The  more 
important  section  of  the  act  defining  the  powers  of  the  Lords 
over  money  bills  reads  as  follows : 

Powers  of  the  House  of  Lords  as  to  Money  Bills. 

Section  i. — '(i)  If  a  Money  Bill,  having  been  passed  by 
the  House  of  Commons,  and  sent  up  to  the  House  of 
Lords  at  least  one  month  before  the  end  of  the  session, 
is  not  passed  by  the  House  of  Lords  without  amendment 
within  one  month  after  it  is  so  sent  up  to  that  House, 
the  Bill  shall,  unless  the  House  of  Commons  directs  to 
the  contrary,  be  presented  to  His  Majesty  and  become  an 
Act  of  Parliament,  on  the  Royal  Assent  being  signified, 


1 1  &  2  Geo.  V,  c.  13. 


116 


ESTIMATES:    PARLIAMENTARY  ACTION 

notwithstanding  that  the  House  of  Lords  have  not  con- 
sented to  the  Bill. 

(2)  A  Money  Bill  means  a  Public  Bill  which  in  the 
opinion  of  the  Speaker  of  the  House  of  Commons  con- 
tains only  provisions  dealing  with  all  or  any  of  the  fol- 
lowing subjects,  namely,  the  imposition,   repeal,  remis- 
sion, alteration,  or  regulation  of  taxation;  the  imposition 
for  the  payment  of  debt  or  other  financial  purposes  of 
charges  on  the  Consolidated  Fund,  or  on  money  provided 
by  Parliament,  or  the  variation  or  repeal  of  any  such 
charges ;  supply ;  the  appropriation,  receipt,  custody,  issue 
or  audit  of  accounts  of   public  money;  the  raising  or 
guarantee  of  any  loan  or  the  repayment  thereof ;  or  sub- 
ordinate matters  incidental  to  those  subjects  or  any  of 
them.     In  this   sub-section   the  expressions   "taxation," 
"public  money,"  and  "loan"  respectively  do  not  include 
any  taxation,  money,  or  loan  raised  by  local  authorities 
or  bodies  for  local  purposes. 

(3)  There  shall  be  indorsed  on  every  Money  Bill  when 
it  is  sent  up  to  the  House  of  Lords  and  when  it  is  pre- 
sented to  His  Majesty  for  assent  the  certificate  of  the 
Speaker  of  the  House  of  Commons  signed  by  him  that 
it  is  a  Money  Bill.     Before  giving  his  certificate,  the 
Speaker  shall  consult,  if  practicable,  two  members  to  be 
appointed  from  the  Chairmen's  Panel  at  the  beginning  of 
each  Session  by  the  Committee  of  Selection. 


CERTIFICATE  OF  SPEAKER 

Section  3. — Any  certificate  of  the  Speaker  of  the 
House  of  Commons  given  under  this  Act  shall  be  con- 
clusive for  all  purposes,  and  shall  not  be  questioned  in 
any  court  of  law. 


BRITISH  FINANCIAL  ADMINISTRATION 

ENACTING  WORDS 

Section  4. — (i)  In  every  Bill  presented  to  His 
Majesty  under  the  preceding  provisions  of  this  Act,  the 
words  of  enactment  shall  be  as  follows,  that  is  to  say: 
"Be  it  enacted  by  the  King's  Most  Excellent  Majesty,  by 
and  with  the  advice  and  consent  of  the  Commons  in  this 
present  Parliament  assembled,  in  accordance  with  the 
provisions  of  the  Parliament  Act,  1911,  and  by  authority 
of  the  same,  as  follows" 

(2)  Any  alteration  of  a  Bill  necessary  to  give  effect  to 
this  section  shall  not  be  deemed  to  be  an  amendment  of 
the  Bill. 

Comment  on  these  provisions  is  unnecessary.  A  reading  of 
them  shows  that  at  the  present  time  the  decisive  power  of  the 
purse  resides  wholly  in  the  House  of  Commons,  except  in  so 
far  as  this  may  be  qualified  by  the  veto  power  of  the  Crown, 
which  for  two  hundred  years  has  not  been  exercised.  In  fact 
the  use  of  an  executive  veto  is  quite  unnecessary  under  the 
rule  of  parliamentary  procedure,  adopted  about  two  hundred 
years  ago,  making  it  out  of  order  for  a  member  of  Parlia- 
ment to  move  to  increase  any  item  in  an  estimate  or  appro- 
priation bill.  If  the  Executive's  own  measure  is  passed  it 
would  be  idle  for  him  to  veto  it. 

Rules  of  Procedure  Governing  the  Consideration  of  Esti- 
mates in  the  House  of  Commons.    In  England  the  rules  gov- 
erning the  conduct  of  business  in  the  House  of  Commons  are 
known  as  "standing  orders."     Though  these  orders  may  be 
modified  by  any  Parliament,  certain  of  them  have  been  so 
long  established  and  affect  so  vitally  the  governmental  system, 
and  particularly  the  relations  between  the  Crown  and  Parlia- 
RuleTin  the   ment>  tnat  tnev  mav  be  said  to  be  accepted  as  in  the  nature 
Nature  of      of  constitutional  law.     Particularly  is  this  true  of  the  pro- 
tional  Law     visions   establishing  the  rules  which  have  been  commented 

118 


ESTIMATES:    PARLIAMENTARY  ACTION 

upon  in  our  chapter  on  some  fundamental  features  of  the 
English  financial  system,  that  no  appropriation  shall  be  made 
except  in  pursuance  of  a  formal  estimate  submitted  on  behalf 
of  the  Crown,  that  individual  members  have  not  the  right  to 
propose  expenditures  or  even  to  move  the  increase  of  the  pro- 
posals of  the  Crown,  etc. 

Following  are  the  standing  orders  now  in  force  governing 
the  manner  in  which  estimates  are  considered  and  appropria- 
tions made : 

STANDING  ORDERS  OF  THE  HOUSE  OF  COMMONS  ON  FINAN- 
CIAL BUSINESS 

Supply  and  Ways  and  Means 

* 

14.  This  house  will,  in  future,  appoint  the  committees  of 
supply  and  ways  and  means  at  the  commencement  of 
every  session,  so  soon  as  an  address  has  been  agreed 
to,  in  answer  to  His  Majesty's  speech.1 
15. — (i)   As  soon  as  the  committee  of  supply  has  been 
appointed   and  estimates  have  been  presented, 
the  business  of  supply  shall,  until  disposed  of, 
be  the  first  order  of  the  day  on  Thursday,  unless 
the  house  otherwise  order  on  the  motion  of  a 
minister   of   the   Crown,   moved   at   the   com- 
mencement of  public  business,   to  be  decided 
without  amendment  or  debate. 
(2)  Not  more  than  twenty  days,  being  days  before 
the  5th  of  August,  shall  be  allotted  for  the  con- 
sideration of  the  annual  estimates  for  the  army, 

1The  language  of  this  rule  may  be  misleading  to  an  American. 
The  word  "appoint"  does  not  mean  that  a  special  or  standing  com- 
mittee shall  be  appointed,  but  that,  following  custom,  the  House  shall 
at  the  beginning  of  the  session  organize  as  a  committee  of  the  whole 
for  the  consideration  of  the  estimates  in  detail,  and  shall  meet  as  a 
matter  of  course  for  the  consideration  of  estimates  not  less  frequently 
than  once  each  week.  The  estimates  may  be  under  review  and  dis- 
cussion from  February,  or  earlier,  until  August. 

119 


BRITISH  FINANCIAL  ADMINISTRATION 

navy,  and  civil  services,  including  votes  on  ac- 
count.1 The  days  allotted  shall  not  include  any 
day  on  which  the  question  has  to  be  put  that 
the  Speaker  do  leave  the  chair,  or  any  day  on 
which  the  business  of  supply  does  not  stand  as 
first  order. 

(3)  Provided  that  the  days  occupied  by  the  consid- 
eration of  estimates  supplementary  to  those  of 
a  previous  session  or  of  any  vote  of  credit,  or 
of  votes  for  supplementary  or  additional  esti- 
mates presented  by  the  Government  for  war  ex- 
penditure, or  for  any  new  service  not  included 
in  the  ordinary  estimates  for  the  year,  shall  not 
be  included  in  the  computation  of  the  twenty 
days  aforesaid. 

(4)  Provided  also  that  on  motion  made  after  notice, 
to  be  decided   without  amendment  or  debate, 
additional  time,  not  exceeding  three  days,  may 
be  allotted   for  the  purposes  aforesaid,  either 
before  or  after  the  5th  of  August. 

(5)  On  a  day  so  allotted,  no  business  other  than  the 
business  of  supply  shall  be  taken  before  eleven, 
and  no  business  in  committee  or  proceedings 
on  report  of  supply  shall  be  taken  after  eleven, 
whether   a   general   order   exempting   business 
from    interruption    under   the    standing   order 
(sittings  of  the  house)  is  in  force  or  not,  un- 
less the  house  otherwise  order  on  the  motion 
of  a  minister  of  the  Crown,  moved  at  the  com- 
mencement of  public  business,   to  be  decided 
without  amendment  or  debate. 

(6)  Of  the  days  so  allotted,  not  more  than  one  day 
in  committee  shall  be  allotted  to  any  vote  on 

1  This  means  that  as  a  matter  of  regular  rule  the  estimates  may 
be  under  discussion  in  committee  of  the  whole  not  more  than  twenty 
weeks  and  not  later  than  August  5. 

1 2O 


ESTIMATES :    PARLIAMENTARY  ACTION 

account,  and  not  more  than  one  sitting  to  the 
report  of  that  vote.1  At  eleven  on  the  close  of 
the  day  on  which  the  committee  on  that  vote 
is  taken,  and  at  the  close  of  the  sitting  on  which 
the  report  of  that  vote  is  taken,  the  chairman 
of  committees  or  the  Speaker,  as  the  case  may 
be,  shall  forthwith  put  every  question  necessary 
to  dispose  of  the  vote  or  the  report. 

(7)  At  ten  of  the  clock  on  the  last  day  but  one  of 
the  days  so  allotted  the  chairman  shall  forth- 
with put  every  question  necessary  to  dispose  of 
the  vote  then  under  consideration,  and  shall  then 
forthwith  put  the  question  with  respect  to  each 
class  of  the  civil  service  estimates  that  the  total 
amount  of  the  votes  outstanding  in  that  class 
be    granted    for    the    services    defined    in    the 
class,  and  shall  in  like  manner  put  severally  the 
questions  that  the  total  amounts  of  the  votes 
outstanding  in  the  estimates  for  the  navy,  the 
army,  and  the  revenue  departments  be  granted 
for  the  services  defined  in  those  estimates. 

(8)  At  ten  of  the  clock  on  the  last,  not  being  earlier 
than  the  twentieth,   of  the  allotted  days,   the 
Speaker  shall  forthwith  put  every  question  nec- 
essary to  dispose  of  the  report  of  the  resolution 
then  under  consideration,  and  shall  then  forth- 
with put,  with  respect  to  each  class  of  the  civil 
service  estimates,  the  question,  that  the  house 
doth  agree  with  the  committee  in  all  the  out- 
standing resolutions  reported  in  respect  of  that 
class,  and  shall  then  put  a  like  question  with  re- 
spect to  all  the  resolutions  outstanding  in  the 
estimates  for  the  navy,  the  army,  the  revenue  de- 

1 A  vote  on  account  is  on  a  credit  to  be  given  to  the  executive  for 
use  after  April  i,  the  beginning  of  the  new  fiscal  year  for  which  the 
appropriations  are  to  be  made. 

121 


BRITISH  FINANCIAL  ADMINISTRATION 

partments,   and   other   outstanding   resolutions 
severally. 

(9)  On  the  days  appointed  for  concluding  the  busi- 
ness of  supply,  the  consideration  of  that  busi- 
ness shall  not  be  anticipated  by  a  motion  of  ad- 
journment, and  no  dilatory  motion  shall  be 
moved  on  proceedings  for  that  business  and  the 
business  shall  not  be  interrupted  under  any 
standing  order.1 

(10)  Any  additional  estimate  for  any  new  matter  not 
included  in  the  original  estimates  for  the  year, 
shall  be  submitted  for  consideration  in  the  com- 
mittee of  supply  on  some  day  not  later  than  two 
days  before  the  committee  is  closed. 

( 1 1 )  For  the  purpose  of  this  order  two  Fridays  shall 
be  deemed  equivalent  to  a  single  sitting  on  any 
other  day. 

1 6.  The  committees  of  supply  and  ways  and  means  shall 
be  fixed  for  Monday,  Wednesday,  and  Thursday,  and 
may  also  be  appointed  for  any  other  day  on  which  the 
house  shall  meet  for  despatch  of  business.2 

17.  Whenever  the  committe  of  supply  stands  as  an  order 
of  the  day,  Mr.  Speaker  shall  leave  the  chair  without 
putting  any  question,  unless  on  first  going  into  supply 
on  the  army,  navy,  or  civil  service  respectively,  or  on 
any  vote  of  credit,  an  amendment  be  moved,  or  ques- 
tion raised,  relating  to  the  estimates  proposed  to  be 
taken  in  supply. 

aThis  is  to  prevent  "filibustering." 

"The  Committee  on  Ways  and  Means  is  also  a  committee  of  the 
whole  house  sitting  for  the  consideration  of  the  administrative  appro- 
priation, revenue  and  loan  bills. 


122 


ESTIMATES:    PARLIAMENTARY  ACTION 

PUBLIC  MONEY 

66.  This  house  will  receive  no  petition  for  any  sum  re- 
lating to  public  service,  or  proceed  upon  any  motion 
for  a  grant  or  charge  upon  the  public  revenue,  whether 
payable  out  of  the  consolidated  fund  or  out  of  money 
to  be   provided   by  parliament,   unless   recommended 
from  the  Crown.1 

67.  This  house  will  not  proceed  upon  any  petition,  motion, 
or  bill,  for  granting  any  money,  or  for  releasing  or 
compounding  any  sum  of  money  owing  to  the  Crown, 
but  in  a  committee  of  the  whole  house. 

68.  This  house  will  not  receive  any  petition  for  compound- 
ing any  sum  of  money  owing  to  the  Crown,  upon  any 
branch  of  the  revenue,  without  a  certificate  from  the 
proper  officer  or  officers  annexed  to  the  said  petition, 
stating  the  debt,  what  prosecutions  have  been  made  for 
the  recovery  of  such  debt,  and  setting  forth  how  much 
the   petitioner   and   his   security   are   able   to   satisfy 
thereof. 

69.  This  house  will  not  proceed  upon  any  motion  for  an 
address  to  the  Crown,  praying  that  any  money  may  be 
issued,  or  that  any  expense  may  be  incurred,  but  in  a 
committee  of  the  whole  house. 

70.  This  house  will  not  receive  any  petition,  or  proceed 
upon  any  motion  for  a  charge  upon  the  revenues  of  In- 
dia, but  what  is  recommended  by  the  Crown. 

71.  If  any  motion  be  made  in  the  house  for  any  aid,  grant 
or  charge  upon  the  public  revenue,  whether  payable  out 
of  the  consolidated  fund  or  out  of  money  to  be  pro- 
vided by  parliament,  or  for  any  charge  upon  the  peo- 
ple, the  consideration  and  debate  thereof  shall  not  be 
presently  entered  upon,  but  shall  be  adjourned  till  such 
further  day  as  the  house  shall  think  fit  to  appoint,  and 

1This  is  to  fasten  responsibility  for  every  finance  proposal  on  the 
executive  and  prevent  "log-rolling." 

123 


BRITISH  FINANCIAL  ADMINISTRATION 

then  it  shall  be  referred  to  a  committee  of  the  whole 
house  before  any  resolution  or  vote  of  the  house  do 
pass  therein. 

Distinction  Between  the  Authorization  of  Expenditures  and 
the  Appropriation  of  Funds.  Although  these  rules  set  forth 
very  clearly  the  procedure  followed  in  voting  on  the  estimates, 
there  are  certain  features  of  this  procedure  that  are  of  suffi- 
cient interest  to  justify  special  comment.  The  first  of  these 
is  the  distinction  that  is  made  between  the  authorization  of 
the  executive  to  incur  expenditures  and  the  appropriation  of 
the  funds  with  which  these  expenditures  are  to  be  met,  or,  to 
use  the  English  expression,  between  the  "voting  of  supply" 
and  the  "provision  of  ways  and  means."  The  former  of  these 
two  acts  is  performed  by  the  House  sitting  in  Committee  of 
the  Whole  on  Supply,  or  more  briefly  in  Committee  on  Supply ; 
the  latter  by  the  House  sitting  in  Committee  of  the  Whole  on 
Ways  and  Means,  or  more  briefly  Committee  of  Ways  and 
Means. 

The  procedure  followed  is  this :  The  House  in  Committee 
of  Supply  considers  the  estimates  and  by  resolution  formally 
approves  the  several  votes  represented  by  such  estimates — the 
effect  of  which  is  formally  to  record  the  sense  of  the  body. 
From  time  to  time  the  Committee  of  Supply  reports  to  the 
House  in  formal  session  its  action  in  reference  to  the  votes 
which  up  to  that  time  have  been  approved.  This  action  being 
approved  by  the  House,  the  latter  then  goes  into  Committee 
of  the  Whole  on  Ways  and  Means  for  the  purpose  of  voting 
the  funds  called  for  by  such  votes  in  Committee  of  Supply. 
The  action  of  the  Committee  on  Ways  and  Means  is  in  turn 
reported  to  the  House  for  its  approval.  These  are  in  the  na- 
ture of  authorizations  of  expenditures,  but  are  not  acts  of 
appropriation.  After  this  approval  has  been  had  the  action 
taken  is  embodied  in  a  bill  which,  upon  securing  the  approval 
of  the  House,  is  transmitted  to  the  House  of  Lords  for  its 
action  and  from  them  to  the  king  for  his  assent.  It  will  be 

124 


ESTIMATES:    PARLIAMENTARY  ACTION 

noted  that  in  neither  committee  of  the  whole  does  discussion   The  Act  of 
take  place  upon  an  appropriation  bill;  only  after  a  conclusion  tkm 
is  reached  is  the  result  embodied  in  a  bill  for  formal  enact- 
ment.    It  is  not  until  the  appropriation  bill  is  signed  that 
money  is  actually  made  available  for  disbursement,  except  in 
so  far  as  money  may  be  voted  on  account. 

It  will  not,  of  course,  have  escaped  notice  that  the  distinction 
that  is  here  made  between  the  voting  of  supply  and  the  provi- 
sion of  ways  and  means  is  substantially  that  made  in  the  Con- 
gress of  the  United  States  between  laws  authorizing  undertak- 
ings or  the  performance  of  work  entailing  expenditures,  such 
as  public  buildings,  engineering  projects,  etc.,  and  the  appro-  Authoriza- 
priation  of  funds  with  which  to  meet  the  liabilities  so  author- 


ized.  These  authorizations  by  Congress  to  undertake  projects  tions  by 
may  run  ahead  of  appropriations  hundreds  of  millions  of  dol- 
lars and  may  contemplate  the  making  of  contracts  which  it  will 
require  years  to  complete;  but  the  acts  authorizing  the  work 
remain  inoperative  until  the  needed  appropriations  are  made  — 
except  in  so  far  as  certain  preliminary  steps  may  be  taken,  the 
expenses  of  which  can  be  met  from  funds  already  granted. 

Though  the  distinction  is  thus  the  same  in  both  countries, 
the  procedure  followed  in  England  has  this  difference  in  detail  : 
It  is  the  House  of  Commons  alone  which  considers  estimates 
and  determines  what  expenditures  shall  be  authorized.  The 
House  of  Lords  participates  in  the  operation  only  as  regards 
the  act  of  appropriation.  Now  that  the  power  of  the  upper 
house  over  money  bills  has  been  practically  destroyed,  this  may  The 
seem  to  be  a  matter  of  no  practical  importance.  It  is  none 


the  less  of  interest  to  note  that  the  theory  that  to  the  House  Between 
of  Commons  alone  pertains  the  function  of  considering  esti-  a™r 


mates  is  one  which  has  always  obtained  under  the  British  con- 

.  .......       Practice 

stitutional  system.  The  real  importance  of  the  distinction  in 
England  is  one  that  in  this  country  has  been  missed,  namely: 
that  on  the  estimates,  in  Committee  of  the  Whole  on  Supply, 
the  administration  is  able  to  obtain  full  discussion  and  have  a 
vote  taken  before  the  appropriation  bill  is  drafted,  which  puts 

125 


BRITISH  FINANCIAL  ADMINISTRATION 


Act  Known 
as  Consoli- 
dated Fund 
Act  No.  i 


Vote  Re- 
stricted to 
Services 
Already 
Authorized 


every  member  on  record  as  to  how  he  stands  on  every  item 
of  the  proposed  supply.  In  this  country  there  is  no  oppor- 
tunity offered  to  the  opposition  for  public  discussion  and  no 
way  for  the  administration  to  know  where  the  majority  stands 
until  the  appropriation  bill  is  up  for  passage,  and  that  is  usu- 
ally toward  the  end  of  the  session. 

Votes  on  Account.  As  has  been  said,  the  financial  year  be- 
gins on  April  i.  As  the  estimates  are  not  laid  before  the 
House  of  Commons  until  February,  it  is  impossible  for  that 
body  to  review  and  discuss  them  in  detail  in  committee  of  the 
whole,  and  to  act  upon  them  intelligently  before  the  beginning 
of  the  year  to  which  they  relate.  To  meet  this  situation,  resort 
is  had  to  what  are  known  as  "votes  on  account."  The  Treas- 
ury submits  an  estimate  setting  forth  the  total  amount  required 
for  each  of  the  votes  comprehended  under  the  civil  services 
and  revenue  departments  as  contained  in  the  regular  estimates 
and  the  amount  that  the  Government  will  require  "on  account" 
for  a  certain  period,  say  three  or  six  months,  and  asks  that 
that  amount  of  supply  be  granted  to  it.  This  the  House  does 
by  a  vote  on  account.  On  the  basis  of  this  vote  and  the  grant 
of  ways  and  means,  as  above  described,  an  appropriation  bill 
known  as  Consolidated  Fund  (No.  i)  Act  is  passed. 

In  order  that  final  action  of  the  House  on  the  estimates  may 
not  be  forestalled,  votes  on  account  are  restricted  to  services 
already  authorized.  It  would  be  exceptional,  if  it  is  ever  done, 
to  have  a  vote  on  account  cover  a  new  service.  Votes  on  ac- 
count are  taken  only  in  reference  to  the  civil  services  and  reve- 
nue departments.  They  are  not  required  for  the  Army  and 
Navy,  since  the  practice  is  to  pass  the  large  votes,  say,  for  the 
pay  of  the  military  and  naval  forces,  prior  to  the  beginning 
of  the  fiscal  year,  and,  under  the  power  that  these  two  serv- 
ices have  of  using,  with  the  approval  of  the  Treasury,  money 
for  one  vote  for  other  votes,  enough  money  is  thus  rendered 
available  for  all  the  needs  of  these  services  until  final  action  on 
the  estimates  is  had. 

126 


ESTIMATES :    PARLIAMENTARY  ACTION 

This  device  of  votes  on  account  serves  the  same  purpose 
as  the  resolutions  which  are  passed  by  the  Congress  of  the 
United  States  continuing  existing  appropriations  in  force 
where  there  is  a  failure  to  pass  any  of  the  regular  appropria- 
tion bills  before  the  beginning"  of  the  fiscal  year.  The  two  Similar  to 

...  T^I  •  «•  Authorizing 

actions  differ,  however,  m  this  respect:  I  he  action  of  the  Resolutions 
British  Parliament  is  based  upon  and  constitutes  a  part  of  the  by  Congress 
action  in  relation  to  the  estimates  for  the  year  to  be  provided 
for,  while  the  American  action  but  continues  the  authorization 
to  expend  money  made  for  the  preceding  year.  It  should  fur- 
thermore be  noted  that  in  the  United  States  resort  to  resolu- 
tions of  this  character  is  had  only  on  comparatively  rare  occa- 
sions; in  England  the  passage  of  votes  on  account  is  a  part 
of  the  regular  procedure  by  which  a  grant  of  funds  is  made 
for  the  conduct  of  the  Government.  It  might  seem  that  the 
necessity  for  this  action  could  be  avoided  by  postponing  the 
beginning  of  the  fiscal  year  to  a  later  date.  The  present  sys- 
tem, however,  offers  the  great  advantage  that  but  a  short  in- 
terval of  time  intervenes  between  the  preparation  and  sub- 
mission of  the  estimates  and  the  period  to  which  the  estimates 
relate.  It  is  believed  that  this  advantage  more  than  compen- 
sates for  the  added  complication  introduced  into  the  system 
of  voting  funds  arising  out  of  the  use  of  votes  on  account. 
In  view  of  the  fact  that,  as  will  shortly  be  pointed  out,  the 
House  makes  no  change  of  any  importance  in  the  estimates 
as  submitted,  this  belief  is  probably  justified.  It  is  question- 
able, however,  whether  such  a  system  would  work  in  Amer- 
ica, unless  responsibility  for  the  initiation  of  finance  meas- 
ures were  placed  on  the  Executive,  and  the  estimates  were  first 
taken  up  for  review  and  discussion  in  a  committee  of  the 
whole  house,  and  the  attitude  of  a  majority  was  determined 
before  the  beginning  of  the  new  fiscal  year. 

Excess  Votes.  Under  certain  circumstances,  provided  the 
sanction  of  the  Treasury  has  been  obtained,  expenditures  can 
be  made  in  excess  of  the  votes.  For  this  purpose  use  is  made 

127 


BRITISH  FINANCIAL  ADMINISTRATION 


Expendi- 
tures in 
Excess  of 
Appropria- 
tions to  Be 
Validated 


Authoriza- 
tion to  Meet 
Emergencies 


of  the  Civil  Contingency  Fund,  a  general  emergency  fund  for 
the  Government  as  a  whole,  or  of  extra  receipts.  All  such  ex- 
cess expenditures  must  be  subsequently  regularized  by  the 
House  of  Commons.  This  is  done  by  the  Ministry  presenting 
an  estimate  for  the  amount  so  expended  and  the  House  of 
Commons  voting  in  supply  what  is  known  as  an  "excess  vote." 
The  money  with  which  to  make  this  vote  good  is  appropriated 
in  the  Consolidated  Fund  (No.  i)  Act.  Action  upon  an  esti- 
mate for  an  excess  vote  is  never  had  until  the  matter  has  been 
carefully  investigated  by  the  Public  Accounts  Committee  of 
the  House,  the  chairman  of  which  is  chosen  from  the  "opposi- 
tion." 

Votes  of  Credit.  A  vote  of  Ncredit  is  a  vote  having  for  its 
purpose  the  placing  at  the  disposition  of  the  Ministry  of  a 
large  sum  of  money,  in  addition  to  that  provided  for  the  regu- 
lar conduct  of  the  government,  with  which  to  meet  some  great 
emergency.  The  resolution  authorizing  the  grant  specifies 
that  the  sum  is  granted  to  His  Majesty  "beyond  the  ordinary 
grants  of  Parliament."  Votes  of  this  character  have  been 
passed  in  order  to  provide  the  Crown  with  the  money  required 
for  the  financing  of  the  great  war  in  which  England  is  now 
engaged. 

Appropriation  Acts.  We  have  seen  that  after  expenditures 
have  been  authorized  in  Committee  on  Supply,  and  ways  and 
means  have  been  provided  in  Committee  on  Ways  and  Means, 
and  the  action  of  these  two  committees  has  been  approved 
by  the  House,  two  appropriation  bills  are  drafted  and  enacted 
as  are  other  general  statutes.  The  first  of  these  two  acts,  the 
Consolidated  Fund  (No.  i)  Act,  is  usually  passed  just  at  the 
close  of  the  financial  year.  Indeed  it  is  apt  to  bear  the  date 
March  31.  It  has  for  its  purpose  to  appropriate  the  money 
required  to  make  good  the  excess  votes  and  votes  on  account. 
It  is  thus  in  the  nature  of  a  general  deficiency  act  as  regards 
the  current  year,  though  for  this  purpose  it  has  a  retro- 

128 


ESTIMATES:    PARLIAMENTARY  ACTION 

active  character,  and  a  provisional  appropriation  for  the  year   Consolidated 
to  come.    In  respect  to  the  latter  feature  it  has  this  peculiarity,   NO.  i  a 
that  though  the  money  carried  by  it  is  based  upon  the  votes    .umP  Su.m 
already  adopted  first  in  supply  and  then  by  the  whole  House,   tion 
it  is  not  specially  earmarked  to  meet  the  expenditures  provided 
for  in  those  votes,  but  may  be  utilized  for  any  of  the  services 
provided  for  by  existing  law. 

The  second  act,  the  Consolidated  (Appropriation)  Act,  is 
usually  passed  at  the  close  of  the  session.     It  is  thus  enacted 
several  months  after  the  beginning  of  the  financial  year  to 
which  it  relates.    Though  it  appropriates  only  the  sum  neces- 
sary to  supplement  the  grant  made  by  the  Consolidated  Fund 
(No.  i)  Act,  it  is  nevertheless  the  final  and  definite  authori-  The  Regular 
zation  for  the  expenditure  of  the  entire  sum  voted  for  the  tion  Act  Ap- 
conduct  of  the  Government  during  the  year.     In  form  this  £ro«ya*es,, 
act  consists  of  a  few  brief  clauses  formally  appropriating  the 
total  amount  carried  by  it,  authorizing  the  use  by  the  Army 
and  Navy  of  surpluses  on  any  votes  for  the  meeting  of  deficits 
on  other  votes,  provided  the  sanction  therefor  of  the  Treasury 
is  obtained,  authorizing  the  Treasury  to  raise  funds  for  tem- 
porary purposes  through  the  issue  of  treasury  bills,  and  direct- 
ing that  the  money  voted  shall  be  applied  as  set  forth  in  the 
votes  listed  in  a  schedule  attached.    It  will  be  noted  thus  that 
the  appropriation  act  itself  carries  the  itemization  of  appro- 
priations only  so  far  as  the  153  votes.    If  information  is  de- 
sired regarding  the  subheads  under  which  the  votes  must  be 
accounted  for,  reference  must  be  had  to  the  estimates.     As 
the  estimates  specify  the  votes  as  well  as  the  subheads,  and 
these  estimates  are  in  fact  passed  as  introduced,  it  is  to  the 
estimates  and  not  to  the  appropriation  acts  that  one  turns  for 
information  regarding  the  details  of  appropriations.1 

Extent  of  Control  Over  Appropriations  Actually  Exercised 
by  the  House  of  Commons.    In  our  consideration  of  some  of 

*For  copies  of  both  the  Consolidated  Fund  (No.  i)   Act  and  the 
Consolidated   Fund    (Appropriation)    Act,  see  Appendixes  2  and  3. 

129 


BRITISH  FINANCIAL  ADMINISTRATION 


Control 
Limited  to 
Review, 
Criticism 
and  Ap- 
proval or 
Disapproval 


Facilities 
for  Critical 
Review  and 
Discussion 


the  fundamental  principles  of  the  English  financial  system, 
we  have  seen  that  the  HOUSJC  of  Commons  has  surrendered, 
if  indeed  it  ever  exercised,  the  right  either  itself  to  originate 
proposals  for  the  expenditure  of  public  funds,  or  to  increase 
the  proposals  submitted  to  it  by  the  Crown.  Theoretically  the 
right  remains  to  it  to  reduce  the  amounts  called  for  by  such 
proposals.  Were  it  so  minded  the  House  could  thus  make  of 
itself  a  powerful  organ  for  securing  economy  in  the  expendi- 
ture of  funds.  Actually,  however,  the  House  avails  itself  of 
this  power  only  when  its  action  is  to  be  regarded  as  a  vote 
of  "lack  of  confidence."  In  fact,  any  modification  of  the  esti- 
mates not  acceptable  to  the  Ministry  would  mean  a  defeat  for 
the  latter,  because  a  Ministry  cannot  stand  which  cannot 
count  on  a  majority  to  support  its  proposals.  A  second  reason 
why  the  power  is  not  exercised  is  found  in  the  fact  that  it  is 
the  disposition  of  the  House  to  seek  larger  appropriations  than 
the  Ministry  is  willing  to  recommend  on  its  own  responsibility. 
This  is  of  significance  since  it  shows  that  were  the  bars  let 
down  and  the  House  given  the  power  to  initiate  proposals 
for  the  expenditure  of  money  or  to  move  the  increase  of 
Crown  proposals,  the  situation  would  be  not  unlike  that  ex- 
isting in  the  Federal  and  State  Governments  of  the  United 
States,  where  Congress  and  the  legislatures,  rather  than  the 
Executive,  are  responsible  for  lavish  if  not  wasteful  appropria- 
tion of  funds,  and  the  executive  veto  alone  is  relied  on  to  pro- 
tect the  people. 

Reduced  to  its  final  terms,  the  function  performed  by  the 
House  of  Commons  in  considering  estimates  may,  therefore, 
be  stated  to  be  that  of  enforcing  responsibility  on  the  Execu- 
tive for  financial  planning  through  review,  criticism,  and  dis- 
cussion, but  not  of  modifying  the  proposals  of  the  Government. 
This  being  so,  it  would  seem  that  abundant  opportunity  should' 
be  afforded  for  the  exercise  of  this  right.  In  point  of  fact, 
a  study  of  the  rules  and  practices  of  the  House  shows  that  the 
exercise  of  this  right  is  in  practice  confined  within  very  nar- 
row limits,  and  this  has  been  made  possible  because  the  right 

130 


ESTIMATES:    PARLIAMENTARY  ACTION 

is  clearly  recognized.  In  respect  to  no  class  of  business  is  the 
form  of  closure  known  as  "the  Guillotine"  more  rigidly  applied 
than  it  is  to  financial  measures.  Such  is  the  pressure  of  public  Limitations 
business  upon  its  time,  that  the  House  has  found  itself  under  Discussion 
the  necessity  of  steadily  reducing  the  time  that  can  be  allotted 
to  the  consideration  of  the  estimates.  A  reading  of  the  stand- 
ing orders  governing  the  matter,  which  have  been  reproduced 
above,  shows  that  a  maximum  of  but  twenty-three  days  is 
allowed  for  a  consideration  of  all  the  estimates  in  committee 
of  the  whole.  Under  these  conditions  all  that  is  possible  for 
those  desiring  to  discuss  the  expenditure  of  proposals  of  the 
Government  is  for  them  to  select  a  few  items  for  discussion, 
concentrate  their  attention  upon  them  and  vote  all  the  remain- 
ing items  without  any  discussion  at  all.  As  Mr.  Higgs  states,1 
"the  practice  now  is  for  the  opposition  to  choose  the  Votes 
which  shall  be  set  down  for  discussion,  and  when  the  allotted 
time  has  been  exhausted  all  the  outstanding  Votes  are  passed 
without  debate." 

Even  this  statement  fails  to  bring  out  the  extent  to  which 
the  estimates  are  voted  without  any  real  consideration  of 
them  by  the  House.  The  points  selected  for  discussion  are, 
as  a  rule,  not  ones  in  respect  to  which  the  opposition  wishes 
to  criticize  the  expenditure  proposals  of  the  Ministry;  they 
relate  rather  to  matters  regarding  which  the  opposition  wishes 
to  criticize  the  general  policy  of  the  Government.  The  motion 
that  is  made  to  reduce  the  sum  assigned  to  such  items  is  thus  a 
purely  pro  forma  motion  upon  which  the  opposition  can  base 
an  attack  upon  some  general  policy  to  which  the  Ministry 
has  committed  itself;  and  as  soon  as  the  discussion  is  con- 
cluded the  motion  is,  more  often  than  not,  withdrawn.  As 
President  Lowell  expresses  it,2  "the  real  object  of  the  debates 
in  supply  at  the  present  day  is  not  financial  discussion,  but 
criticism  of  the  administration  of  the  departments,  their  work 

1  Henry  Higgs :    The  Financial   System  of  the  United  Kingdom, 
P-  32. 
*A.  Lawrence  Lowell:  The  Government  of  England,  Vol.  I,  p.  301. 


BRITISH  FINANCIAL  ADMINISTRATION 

being  brought  under  review  as  their  estimates  are  considered." 
In  considering  this  matter  it  should  be  borne  in  mind,  how- 
ever, that  the  opposition  has  full  opportunity  to  secure  knowl- 
edge of  how  the  financial  affairs  of  the  nation  are  being  admin- 
istered through  the  Committee  on  Public  Accounts,  through 
the  Comptroller  and  Auditor  General  and  through  open  pub- 
lic question  and  answer.  "Complaint  has  been  made,"  says 
Lowell,  "that  the  Government  no  longer  cares  what  grants 
are  brought  forward  for  debate — leaving  that  to  the  Opposi- 
tion,— or  how  long  the  discussion  upon  them  may  take,  or 
whether  it  ends  with  a  vote  upon  them  or  not,  knowing  very 
well  that  all  these  grants  must.be  adopted  under  closure  when 
the  twenty  days  expire.  This  is  perfectly  true;  but  on  the 
other  hand  the  procedure  gives  the  fullest  opportunity  for 
criticising  the  administration,  and  forcing  a  discussion  of 
grievances,  the  matters  to  be  criticised  being  selected  by  the 
critics  themselves." 

What  President  Lowell  says  regarding  the  opportunity  that 
consideration  of  the  estimates,  in  conjunction  with  the  power 
to  propose  pro  forma  motions  for  a  reduction  of  an  item  of 
appropriation,  affords  the  opposition  to  criticize  the  Govern- 
ment of  the  day  may  be  quite  true,  though  certainly  the  oppor- 
tunity is  a  limited  one,  except  in  Committee  on  Public  Ac- 
counts. From  the  standpoint  of  a  critical  examination  of  the 
estimates  themselves  in  committee  of  the  whole,  however,  it 
amounts  to  almost  nothing.  Actually  it  would  appear,  there- 
fore, that  the  House  not  only  adopts  the  estimates  precisely  as 
they  are  submitted  to  it  by  the  Ministry,  but  does  not  even  sub- 
ject them  to  any  real  discussion  or  criticism,  certainly  not  to  a 
discussion  or  criticism  that  concerns  itself  with  the  •  details 
of  each  proposal. 

This  being  so,  the  question  may  be  asked :  What  is  the  ob- 
ject gained  by  having  these  estimates  submitted  to  the  House 
at  all  as  opportunities  for  consideration  of  matters  of  general 
policy  could  easily  be  provided  for  in  some  other  way?  The 
answer  to  this  question  is  that  this  action  accomplished  two 

132 


ESTIMATES:    PARLIAMENTARY  ACTION 

very  important  things:  It  is  an  exceedingly  effective  means 
for  securing  complete  publicity  in  respect  to  the  financial 
operations,  past  and  proposed,  of  the  Government;  and  it  af- 
fords the  best  means  for  definitely  locating  responsibility  for 
the  conduct  of  the  financial  affairs  of  the  nation  and  ensuring 
accountability  for  the  manner  in  which  this  responsibility  is 
met. 

In  this  connection  it  is  of  prime  importance  to  note  that 
this  whole  system  of  securing  control  through  publicity  de- 
pends upon  the  requirement  that  such  publicity  shall  be  a  real 
and  not  a  nominal  one.  It  is  safe  to  say  that  this  system 
would  break  down  in  a  moment  but  for  the  completeness  and 
clearness  with  which  the  information  regarding  expenditure,  The  Vital 
past  and  proposed,  is  laid  before  Parliament,  and  the  pro-  Of  ^h"8 
cedure  which  requires  the  Cabinet  members  to  be  present  to  System 
answer  questions  or  criticism.  The  power  of  the  Ministry 
in  respect  to  the  expenditure  of  funds  is  enormous,  but  every 
detail  of  its  action  must  be  done  in  the  open.  Furthermore, 
and  what  is  of  equal  importance,  this  system  would  scarcely 
be  feasible  but  for  the  fact  that  in  the  Treasury  there  is  an 
organ,  which  may  be  held  responsible  to  a  majority  in  Parlia- 
ment, whose  exclusive  duty  is  to  exercise  not  an  intermittent 
but  a  day-to-day  control  over  practically  all  the  financial  acts 
of  the  spending  departments,  whether  these  acts  relate  to  the 
estimating  of  future  needs  or  to  the  expenditure  of  the  funds 
finally  granted.  Coupled  with  this  is  the  requirement  that  all 
expenditures  shall  be  carefully  audited  by  an  officer  independ- 
ent of  the  Ministry,  the  Comptroller  and  Auditor  General,  the 
result  of  whose  acts  must  be  reported  to  the  House  of  Com- 
mons and  be  there  passed  upon  by  a  Committee  on  Public 
Accounts  in  which  the  opposition  is  fully  represented.  In 
addition  to  these  is  the  Select  Committee  on  Estimates,  whose 
work  is  described  below.  These  features  of  the  British  finan- 
cial system,  which  will  be  fully  described  elsewhere  in  this  re- 
port, are  here  mentioned,  since  it  is  of  great  importance 
to  realize  that  nothing  approaching  the  adoption  by  another 

133 


BRITISH  FINANCIAL  ADMINISTRATION 


government  of  the  English  system  for  parliamentary  consid- 
eration of  estimates  would  be  feasible  unless  that  government 
were  prepared  to  adopt  at  the  same  time  safeguards  corre- 
sponding to  the  ones  which  we  have  just  enumerated. 

Establishment  in  1912  of  the  Select  Committee  on  Esti- 
mates. Notwithstanding  the  general  satisfaction  that  exists 
in  England  with  the  system  for  the  handling  of  estimates  in 
the  House  of  Commons,  there  is  some  feeling  that  the  House 
should,  itself,  in  some  more  direct  way,  concern  itself  with  at 
least  a  scrutiny  of  the  estimates  laid  before  it.  This  feeling 
found  expression  in  the  provision  that  was  made  in  1902  for 
the  appointment  of  a  select  committee  "to  inquire  whether  any 
plan  can  be  advantageously  adopted  for  enabling  the  House, 
by  select  committee,  or  otherwise,  more  effectively  to  make 
an  examination,  not  involving  criticisms  of  policy,  into  the 
details  of  national  expenditure." 

It  is  of  importance  to  note  that,  in  providing  for  the  ap- 
pointment of  a  committee,  care  was  taken  to  exclude  from  its 
province  any  consideration  of  matters  of  policy.  It  was  felt 
that  any  attempt  to  bring  into  existence  an  organ  that  would 
share,  or  in  any  manner  participate,  in  the  responsibility  for 
the  determination  of  a  program  of  work  would  weaken  or 
dissipate  the  complete  responsibility  for  the  direction  of  pub- 
lic affairs  now  vested  in  the  Ministry,  and  would  thus  be  a 
of  Estimates  direct  inroad  on  that  principle  of  cabinet  government  and 
ministerial  responsibility  which  is  the  keystone  to  the  whole 
constitutional  system  of  Great  Britain.  The  object  sought, 
therefore,  was  merely  an  examination  of  the  question  as  to 
whether  means  might  not  be  devised  through  which  the  House 
might  more  effectively  examine  into  the  details  of  national 
expenditure. 

This  committee  made  an  exceedingly  interesting  investiga- 
tion into  the  whole  subject  of  the  system  and  procedure  em- 
ployed in  the  framing  of  estimates,  their  consideration,  and 
the  control  of  the  expenditure  of  the  funds  granted.  Its  two 

134 


Desire  of 
the  Major- 
ity to  Have 
a  More 
Intimate 
Knowledge 


ESTIMATES:    PARLIAMENTARY  ACTION 

reports,1  one  submitted  in  1902  and  the  other  in  1903,  have 
been  of  the  greatest  service  to  the  commission  in  the  prepara- 
tion of  this  report.  Its  final  report  contains  some  very  in- 
teresting remarks  and  recommendations  bearing  directly  on 
this  matter  of  providing  more  effective  means  whereby  the 
House  itself  might,  if  not  exercise  greater  control,  at  least 
have  a  greater  opportunity  for  informing  itself  regarding 
financial  conditions  and  operations.  In  the  first  place,  it 
pointed  out  that  the  discussion  which  took  place  on  going  into 
Committee  of  Supply  far  from  furnished  an  adequate  oppor- 
tunity for  a  real  consideration  of  financial  matters.  It  said : 

Eight  witnesses  who  have  had  special  opportunities  of 
noticing  the  effect  of  discussions  in  the  Committee  of  the 
House  of  Commons  on  Supply  gave  it  as  their  opinion 
that  for  many  years  past  the  result  was  to  urge  increased 
not  decreased  expenditures.  Your  Committee  do  not  pro-  Report  of 

V,  .  .the  Select 

nounce  on  this.  .But  we  consider  that  the  examination  of  Committee 
Estimates  by  the  House  of  Commons  leaves  much  to  be 
desired  from  the  point  of  view  of  financial  scrutiny.  The  tures 
color  of  the  discussions  is  unavoidably  partisan.  Few 
•  questions  are  discussed  with  adequate  knowledge  or  set- 
tled on  their  financial  merits.  Six  hundred  and  seventy 
members  of  Parliament,  influenced  by  party  ties,  occupied 
with  other  work  and  interests,  frequently  absent  from 
the  chamber  during  the  twenty  to  twenty-three  supply 
days,  are  hardly  the  instrument  to  achieve  a  close  and 
exhaustive  examination  of  the  immense  and  complex  esti- 
mates now  annually  presented.  They  cannot  effectively 
challenge  the  smallest  item  without  supporting  a  motion 
hostile  to  the  Government  of  the  day;  and  divisions  are 
nearly  always  decided  by  a  majority  of  members  who 
have  not  listened  to  the  discussion.  Your  Committee 
agree  in  thinking  that  the  Estimates  are  used  in  prac- 

1  Report  from  the  Select  Committee  on  National  Expenditure, 
together  with  the  Proceedings  of  the  Committee,  Minutes  of  Evi- 
dence, Appendix  and  Index,  December  4,  1902;  July  7,  1903. 

135 


BRITISH  FINANCIAL  ADMINISTRATION 

tice — perhaps  necessarily  by  the  Committee  of  Supply- 
mainly  to  provide  a  series  of  convenient  and  useful  oppor- 
tunities for  the  debating  of  Policy  and  Administration, 
rather  than  to  the  criticism  and  review  of  financial  method 
and  of  details  of  expenditure. 

After  all,  this  is  high  praise  for  the  English  financial  sys- 
tem, for  if,  with  all  the  facilities  given  the  opposition  to  de- 
tect irregularities  in  practice  and  to  raise  questions  which  may 
be  annoying  to  the  administration,  only  questions  of  broad 
policy  are  made  the  subjects  of  attack,  there  can  be  little 
doubt  of  the  fidelity  or  of  the  efficiency  of  management.  The 
demand  for  a  means  of  independent  consideration  of  the  esti- 
mates by  members  of  Parliament  is  largely  a  majority  de- 
mand. Various  proposals  were  brought  before  the  commit- 
tee to  make  it  possible  for  members  who  had  no  first-hand 
contact  with  administration  to  become  better  informed.  One 
was  "that  the  estimates  should  as  early  as  possible  be  re- 
ferred to  a  grand  committee  and  should  only  be  discussed  in 
the  whole  house  on  report  of  that  committee."  A  "grand" 
committee  is  a  large  standing  committee  consisting  of  not 
less  than  sixty  nor  more  than  eighty  members  of  the  House 
Proposal  appointed  by  the  Committee  of  Selection,  which  has  power 
Committee  to  discharge  members  and  substitute  others  during  the  course 
of  the  session,  and  is  distinguished  from  a  select  committee 
in  that  it  lasts  throughout  the  session  and  does  not  expire, 
as  does  the  select  committee,  when  it  has  made  a  report  upon 
the  special  matter  committed  to  its  charge.  While  tried  ex- 
perimentally in  1882,  two  grand  committees  were  established 
in  1888  and  made  permanent  organs  of  the  House.  They  were 
designed  to  relieve  the  House  of  the  necessity  of  debate,  and 
in  order  to  secure  the  presence  of  persons  who  may  throw  light 
upon  any  particular  bill,  the  grand  committee  may  appoint  not 
more  than  fifteen  additional  members  for  the  consideration  of 
a  particular  bill. 

The  procedure  of  the  grand  committee,  therefore,  to  this 

136 


ESTIMATES:    PARLIAMENTARY  ACTION 

extent  takes  the  place  of  the  committee  of  the  whole  house, 
and  naturally  the  Select  Committee  on  National  Expenditure, 
to  wkich  this  suggestion  was  made,  did  not  feel  that  the  House 
would  take  kindly  to  the  idea  of  divesting  itself  of  any  of  its 
prerogatives  in  the  consideration  of  so  important  a  matter  as 
that  of  the  estimates  in  committee  of  the  whole,  and  merely 
said:  "We  are  of  the  opinion  that  the  House  of  Commons 
would  be  strongly  adverse  to  delegating  any  of  its  powers  to 
such  a  committee." 

The  action  finally  recommended  by  the  committee  by  which 
the  House  might  exert  a  more  effective  scrutiny  of  estimates, 
was  the  creation  of  a  committee  to  be  known  as  the  "Estimates 
Committee"  with  a  position  and  functions  analogous  to  those 
of  the  Public  Accounts  Committee,  except  that  it  was  intended 
that  it  would  give  special  attention  to  the  proposals  for  future 
•expenditures,  while  the  Committee  on  Public  Accounts  would 
give  more  largely  their  attention  to  the  past  expenditures,  in 
which  they  would  be  assisted  by  the  Auditor  General,  whose 
duty  it  is  to  review  and  approve  or  disapprove  each  transac- 
tion in  passing.  Specifically  the  recommendation  was  as  fol- 
lows: 

Your  Committee  are  therefore  prepared  to  recommend 
that  such  a  Select  Committee  be  appointed;  that  it  be 
called  "The  Estimates  Committee";  that  it  be  appointed 
continuously  in  the  same  way  and  possess  the  same  pow- 
ers as  the  Public  Accounts  Committee;  that  in  order  to 
combine  and  unify  the  machinery  of  financial  control,  and  Delect . 

.       J  .  Committee 

as  it  were  dovetail  the  Estimates  Committee  on  to  the   on  Estimates 
Public  Accounts  Committee,  a  proportion  of  members  be   men°ded 
appointed  to  sit  on  both  committees;  that  the  Estimates   instead 
Committee  with  powers  to  call  for  witnesses  and  papers, 
not  of  a  secret  character,  should  examine  a  class,  portion 
or  branch  of  the  estimates  for  the  current  year  not  ex- 
ceeding one-fourth  of  the  whole;  that  this  class  shall  have 
been  selected  for  them  in  the  previous  year  by  the  Public 
Accounts  Committee,  who  shall  likewise  notify  the  De- 

137 


BRITISH  FINANCIAL  ADMINISTRATION 

partments  concerned  and  the  Treasury;  that  the  Public 
Accounts  Committee,  while  preserving  full  discretionary 
power  in  the  selection  of  the  class  or  portion  of  the  Esti- 
mates to  be  referred  to  the  Estimates  Committee,  shall 
endeavor  to  pass  systematically  in  review  each  vote 
within  a  limited  period  of  years;  that  to  facilitate  exam- 
ination the  selected  class  or  portion  shall  be  presented  at 
the  earliest  possible  date  after  the  day'  of  the  meeting  of 
Parliament,  and  that  the  consideration  of  this  class  by  the 
House  of  Commons  in  Committee  of  Supply  shall  if  con- 
venient be  deferred  until  the  presentation  of  the  Report 
of  the  Estimates  Committee  thereupon. 

In  explaining  and  defending  this  recommendation  the  re- 
port says : 

We  are  impressed  with  the  advantages,  for  the  pur- 
poses of  detailed  financial  scrutiny,  which  are  enjoyed  by 
Select  Committees,  whose  proceedings  are  usually  devoid 
of  party  feeling,  who  may  obtain  accurate  knowledge  col- 
lected for  them  by  trained  officials,  which  may,  if  so  de- 
sired, be  checked  or  extended  by  the  examination  of  wit- 
nesses or  the  production  of  documents ;  and  we  feel  that 
it  is  in  this  direction  that  the  financial  control  of  the 
House  of  Commons  is  most  capable  of  being  strength- 
ened. .  .  . 

We  consider  that  if  the  portion  of  the  Estimates  se- 
lected were  not  unduly  large  the  temporal  difficulties  inci- 
dental to  their  examination  would  be  removed,  and  that 
as  the  Committee  would  have  no  power  to  disallow  any 
expenditure,  but  only  to  report  thereon,  there  could  be  no 
question  of  any  interference  with  ministerial  responsibil- 
ity or  with  Parliamentary  control. 

If  we  analyze  this  proposition  of  the  committee  certain 
points  of  .importance  stand  out  clearly.  The  first  is  that  the 
position  is  taken  that  there  is  a  real  need  for  a  closer  scrutiny, 

138 


ESTIMATES:    PARLIAMENTARY  ACTION 

by  the  House,  of  estimates  and  expenditures.     Secondly,  it  Functions 

is   held   that  in  providing  the   means   whereby  such   closer   investiga- 

scrutiny  may  be  exercised  great  care  must  be  taken  that  the   £on  and 

principle  of  ministerial  responsibility  shall  not  be  weakened. 

The  bad  consequences  that  have  resulted  from  the  vesting 

of  financial  powers  in  the  Budget  Committee  in  the  Cham- 

ber of  Deputies  in  France  are  too  well  known  to  make  any 

move  in  that  direction,  one  that  will  meet  with  favor.     The   Does  not 

third  point  is  that  a  close  scrutiny  of  estimates  and  expendi- 


tures  can  be  had  without  infringing  upon  the  principle  of  Principle 
responsible  government,  provided  the  committee  making  the   sible 
scrutiny  has'  no  power  to  disallow  items,  but  has  merely  the 
function  of  investigation  and  report. 

It  is  evident  that  what  was  here  proposed  was  the  creation 
of  a  committee  that  would  have  substantially  the  same  func- 
tions and  powers  as  those  possessed  by  President  Taft's  Com- 
mission on  Economy  and  Efficiency  in  the  United  States,  ex- 
cept that  it  was  required  to  report  to  the  legislative  branch. 
Possessed  of  no  power  of  direction  or  control,  it  would  have 
the  duty  each  year  of  making  a  detailed  investigation  of  esti- 
mates, organization,  methods  of  procedure,  activities  and  ex- 
penditures of  some  one  service  or  group  of  services,  and  re- 
porting the  findings  to  Parliament. 

This  proposal  has  much  to  commend  it.  The  evident  reason 
for  the  committee  is  that  it  may  serve  in  an  advisory  capacity 
in  review  of  the  estimates,  with  special  attention  to  the  actual 
needs  of  the  services.  It  is  difficult  to  see,  however,  why  it  was 
thought  necessary  to  provide  for  a  new  committee  to  perform 
this  work.  In  the  Public  Accounts  Committee  the  House 
already  has  a  committee  of  the  highest  standing,  composed  of 
members  who  have  made  matters  of  public  finance  their  spe- 
cial concern  and  who  have  firmly  established  the  tradition  of 
acting,  so  far  as  possible,  in  a  non-partisan  manner.  It  would 
seem  to  an  outsider  that  the  logical  recommendation  would 
have  been  that  Parliament  enlarge  the  powers  or  duties  of  the 
Public  Accounts  Committee  and  make  of  it  the  one  source  to 

139 


BRITISH  FINANCIAL  ADMINISTRATION 

which  the  House  would  look  for  information  concerning  the 
scrutiny  of  estimate  and  expenditure  matters. 

The  committee  made  certain  other  recommendations  look- 
ing to  strengthening  the  opportunities  of  the  House  to  in- 
form itself  concerning,  and  if  need  be  to  exercise  a  greater 
control  over,  expenditures.  Such,  for  example,  was  the  recom- 
mendation that  greater  opportunity  be  given  to  the  House  to 
consider  and  discuss  estimates,  that  the  powers  of  the  Treas- 
ury, Comptroller  and  Auditor  General  and  the  Public  Ac- 
counts Committee  be  extended.  It  furthermore  found  that 
the  House  might  well  be  furnished  with  greater  information 
than  had  been  the  case  concerning  expenditures  in  the  past 
and  the  reason  for  changes  proposed  in  the  estimates.  This 
defect,  it  was  thought,  could  easily  be  remedied  by  the  Govern- 
ment submitting  more  detailed  data  in  connection  with  the 
estimates.  It  said  thus: 

It  has  been  suggested  as  a  means  of  providing  Mem- 
bers with  more  information  that  a  statistical  statement 
should  be  presented  annually  with  the  Estimates  showing 
the  variation  of  each  Vote  during  a  period  of  ten  years. 
To  this  should  be  added  a  few  notes  explanatory  of  any 
marked  rise  or  fall  in  certain  years.  Your  Committee 
approve  this  suggestion,  and  they  consider  that  in  pre- 
senting the  Estimates  to  Parliament  more  detailed  infor- 
mation, especially  as  to  new  expenditure  might  be  fur- 
nished to  the  House  of  Commons  in  the  Memoranda 
which  are  now  circulated  with  the  Army,  Navy  and  Civil 
Services  Estimates. 

This  report,  though  attracting  favorable  attention,  and  ex- 
ercising a  certain  influence  upon  public  opinion,  produced  no 
immediate  results  in  the  way  of  direct  action  for  a  period  of 
ten  years.  In  1912,  however,  its  central  recommendation,  that 
for  the  appointment  of  a  Select  Committee  on  Estimates,  was 
taken  up  and  put  into  execution.  On  April  17  of  that  year 
the  House  ordered: 

140 


ESTIMATES:    PARLIAMENTARY  ACTION 

That  a  select  committee  be  appointed  to  examine  such 
of  the  Estimates  presented  to  this  House  as  may  seem  fit 
to  the  Committee,  and  to  report  what,  if  any,  economies 
consistent  with  the  policy  implied  in  those  Estimates 
should  be  effected  therein. 

It  will  be  noted  that  the  recommendation  of  the  Commit- 
tee on  National  Expenditure,  that  this  committee  be  made  in  What  the 

.  Committee 

a  way  dependent  upon  the  Public  Accounts  Committee,  was  on 
not  followed.  This  committee  immediately  entered  upon  its 
work  in  the  spirit  intimated  in  the  suggestion  of  the  Commit- 
tee on  National  Expenditure.  It  selected  for  examination  the 
first  year  the  estimate  of  the  Office  of  Works  and  Public  Build- 
ings. Its  report,1  submitted  July  25,  1912,  represents  a  care- 
ful investigation  of  the  affairs  of  this  branch  of  the  public 
service,  and  incidentally  throws  great  light  on  the  whole  sub- 
ject of  the  procedure  employed  in  framing  estimates  and  in 
particular  the  effectiveness  of  treasury  control. 

In  this  report,  while  stating  that  in  its  opinion  the  super- 
vision exercised  by  the  Treasury  over  estimates  constituted  Its  Interest 
a  real  control,  it  nevertheless  added  "that  in  saying  this  they  and 
would  not  have  it  supposed  that  the  criticism  of  the  Treasury  Efficiency 
is  all  that  is  required.     They  hope  and  believe  that  the  work 
of  this  committee  will  become  a  very  real  and  useful  part  of 
the  machinery  employed  for  securing  economy  and  efficiency 
in  the  preparation  of  estimates  presented  to  Parliament." 

This  is  significant  as  again  stating  that,  notwithstanding 
the  effectiveness  of  treasury  control,  the  House  itself  should 
have  and  exercise  the  means  of  scrutinizing  estimates  and  gen- 
eral methods  of  administration  obtaining  in  the  public  services. 
The  suggestion  that  the  committee  be  continued  was  acquiesced 
in.  The  second  report  of  the  committee  was  made  in  1913  and 
deals  with  the  estimates  of  the  Admiralty.  The  serious  weak- 
ness of  the  committee  for  such  work  is  that  it  has  no  staff. 

1  Select  Committee  on  Estimates,  Report,  1912. 

141 


BRITISH  FINANCIAL  ADMINISTRATION 

It  is  too  early  to  determine  just  the  part  that  this  commit- 
tee will  play  in  the  future. 

E.  Hilton  Young,  in  his  recently  published  volume  on  the 
English  system  of  finance,1  says  regarding  this  committee : 

There  is  a  consensus  that  as  an  instrument  of  economy 
the  Committee  has  not  justified  all  of  the  high  hopes  that 
were  held  for  it  at  its  first  appointment.  Confronted 
without  preparation  with  a  bulky  volume  of  technical- 
ities, its  members,  lacking  expert  knowledge  of  the  details 
of  the  administrative  work  which  they  are  set  to  examine, 
must  find  themselves  inevitably  very  much  at  sea.  Men 
contending  for  economy  in  general  are  always  at  a  dis- 
advantage when  pitched  against  men  contending  for  ex- 
penditure on  particulars.  For  enlightenment  the  Com- 
mittee must  depend  on  the  officials  of  the  department 
whose  estimate  is  being  subjected  to  scrutiny  and  on  the 
Treasury.  Now  it  is  those  officials  who  have  themselves 
prepared  the  estimate,  and  the  Treasury  has  formally 
approved  it;  and  although  both,  we  may  feel  assured, 
loyally  place  all  means  of  information  at  the  disposal  of 
the  Committee,  it  is  not  in  the  nature  of  things  that  under 
such  conditions  the  department  or  the  Treasury  officials 
should  find  many  imperfections  in  their  own  work  to 
which  to  direct  the  attention  of  the  Committee.  In  the 
result  the  labours  of  the  Committee  are  prolonged,  but  its 
results  are  not  of  commensurate  importance.  As  the 
fruit  of  many  laborious  days  spent  on  the  Navy  estimates, 
the  chief  recommendation  was  one  relating  to  the  supply 
of  tobacco  to  the  sailors.  It  is  not  to  be  wondered  at, 
after  the  first  glow  of  enthusiasm  in  1912  was  over  and 
when  it  became  apparent  to  the  Committee  to  what  unre- 
warding labours  they  were  confined  by  their  inhibition 
from  questions  of  policy,  that  there  has  even  been  a  diffi- 

1  E.   Hilton  Young :    The   System   of   National   Finance,   London, 
,  P-  92- 

142 


ESTIMATES:    PARLIAMENTARY  ACTION 

culty  in  securing  the  needed  quorum  of  five  at  its  meet- 
ings. .  .  . 

It  is  to  be  feared  that  the  Estimates  Committee,  unless 
it  can  be  supplied  with  a  servant  and  helper  in  a  position 
similar  to  that  of  the  Auditor  General,  is  never  likely  to 
do  very  much  good ;  and  in  the  meanwhile  it  may  even  do 
some  harm.  Until  its  institution  parliamentary  criticism 
was  the  bogey  which  intimidated  ministers  and  others  ex- 
travagantly inclined  and  made  them  cautious.  The  hardi- 
est sinner  hesitated  at  the  thought  that  his  extravagance 
might  be  made  the  subject  of  special  criticism  and  debate 
in  the  House.  Seldom  indeed  were  any  criticisms  of  the 
sort  made,  but  the  possibility  of  them  had  a  restraining 
effect.  Now  the  bogey  is  materialised  and  put  into  a 
committee  room,  and  turns  out  to  be  something  of  a  hol- 
low turnip  after  all.  Virtue  is  gone  out  of  it.  Another 
ill  effect  of  the  new  system  is  that  it  fixes  the  time  at 
which  criticism  will  be  made,  and  relieves  the  depart- 
ments from  all  apprehension  of  unexpected  criticism  be- 
tween whiles.  At  the  rate  of  progress  which  it  has  made 
in  the  past,  the  Estimates  Committee  will  get  the  whole 
of  the  estimates  scrutinised  about  once  every  ten  years. 
Once  then  that  it  has  undergone  its  ordeal  before  the 
Committee,  and  no  very  severe  one,  each  department  will 
know  that  it  has  ten  years  of  safety  before  it.  The  dis- 
appointing result  of  the  Committee's  labours,  a  disap- 
pointment due  in  no  wise  to  the  Committee  itself  but 
wholly  to  circumstances  of  its  work  for  which  it  is  not 
responsible,  is  therefore  not  a  matter  of  indifference.  It 
would  be  better  that  its  powers  should  be  ended  if  not 
mended,  and  to  mend  them  what  is  chiefly  needed,  to 
judge  by  the  experience  of  the  Public  Accounts  Commit- 
tee, is  a  permanent  and  independent  official  of  its  own  as 
an  adviser. 


CHAPTER  VII 
DISBURSEMENT  OF  PUBLIC  FUNDS 

Control  of  Exchequer  Issues  by  the  Comptroller  and  Auditor  General ; 
Grants  of  "Credits"  to  the  Treasury;  Issues  of  Money  from  the 
Exchequer  to  "Principal  Accountants";  The  Paymaster  General; 
Departmental  "Accounting  Officers" ;  Personal  Liability  of  Ac- 
counting Officers;  Accounting  Officers  Not  Bonded. 

Having  reached  the  point  where  funds  are  formally  appro- 
priated by  Parliament  for  meeting  national  expenditures,  we 
have  need  to  consider  the  machinery  and  procedure  employed 
in  their  utilization.  This,  it  will  be  found,  involves  a  num- 
ber of  distinct  operations,  the  money  passing  through  a  num- 
ber of  hands  before  final  payment  is  made.  The  motives  lead- 
ing to  this  splitting  up  of  the  work  of  payment  of  obligations 
is  due  partly  to  the  need  for  distributing  the  work  so  that  it 
can  be  expeditiously  performed,  and  partly  to  the  necessity  for 
establishing  the  checks  and  control  that  are  essential  to  the 
securing  of  full  accountability. 

Control  of  Exchequer  Issues  by  the  Comptroller  and  Auditor 
General.  The  theory  that  final  control  over  the  expenditure 
of  public  funds  rests  in  the  legislative  branch  of  the  govern- 
Functions  of  ment  requires  that  that  body  shall  provide  means  for  ensuring 
omptroller  tkat;  no  monev  shau  issue  from  the  Treasury  except  in  pur- 
suance of  express  authorization.  To  this  end,  most  if  not 
all  nations  operating  under  this  theory  provide  for  an  officer 
to  represent  it  as  guardian  of  the  public  funds.  To  this  offi- 
cer, usually  known  as  "Comptroller,"  is  intrusted  the  duty  of 
examining  all  requisitions  upon  the  Treasury  for  funds  and 
of  determining  whether  they  shall  be  honored.  If  he  finds 
that  sanction  of  law  exists  for  the  payment  he  issues  his  war- 

144 


DISBURSEMENT  OF  PUBLIC  FUNDS 

rant  to  that  effect,  and  upon  this  document,  and  this  document 
alone,  payment  is  made. 

In  our  account  of  the  Exchequer  given  in  our  chapter  on 
some  fundamental  features  of  the  English  financial  system,1 
we  have  seen  that  early  provision  was  made  in  England  for 
an  officer  of  this  character.     One  of  the  three  persons  pos- 
sessing the  keys  to  the  strong  box  was  the  Auditor,  to  whom   Reviews 
was  intrusted  the  duty  of  seeing  that  no  money  should  be  taken   actions 
from  the  box  until  proper  authority  therefor  was  shown.    Al-  Action  b 
most  from  the  beginning  this  office  was  one  of  great  responsi-  Treasury 
bility  and  power.     Mr.  Bowles  pointed  this  out  in  his  testi- 
mony   before     the    Committee     on     National     Expenditure 
(1902)  where  he  says:  2 

"The  auditor  was  an  officer  of  very  great  importance 
who  had  absolute  control  over  the  issues,  and  could  refuse 
them  even  though  he  were  required  to  make  an  issue  by 
the  Treasury,  if  in  his  opinion  the  conditions  of  the  issue 
did  not  comply  with  the  law.  Thus,  in  1811,  Lord  Gren- 
ville,  then  Auditor  of  the  Exchequer,  refused  to  make  an 
issue  of  £500,000,  though  required  to  do  so  by  the  First 
Lord  and  four  other  Lords  of  the  Treasury,  for  want  of 
the  due  authority  from  the  Crown,  which,  in  consequence 
of  the  incapacity  of  George  III.,  could  not  then  be  ob- 
tained. Another  similar  instance  occurred  in  1832  in 
reference  to  the  Russo-Dutch  loan,  when  the  Auditor's 
scruples  were  removed  by  the  opinion  of  the  Law  Offi- 
cers of  the  Crown." 


In  1834  this  system  was  changed  by  the  abolition  of  the 
two  old  offices  of  Clerk  of  the  Rolls  and  Auditor  and  the 
creation  of  the  new  office  of  "Comptroller  General  of  the 
Receipt  and  Issue  of  Her  Majesty's  Exchequer,"  to  which 
officer  was  transferred  the  duty  of  seeing  that  no  money  should 

1  See  p.  36. 

2  Report,  p.  63. 

145 


BRITISH  FINANCIAL  ADMINISTRATION 

issue  from  the  Exchequer  unless  warrant  of  law  therefor  could 
be  shown  and  all  other  legal  requirements  had  been  met. 
Thereafter  no  money  could  issue  from  the  Exchequer  except 
upon  the  order  of  this  officer. 

The  next  change  of  importance  took  place  through  the 
Exchequer  passage  of  the  famous  Exchequer  and  Audit  Departments 
Dedartaent  "^ct  °^  :^66,  wmch  thoroughly  reorganized  the  whole  account- 
Act,  1866  ing  and  auditing  system  of  the  Government.  In  a  subsequent 
chapter  we  trace  the  development  of  the  present  auditing  sys- 
tem which  culminated  in  the  act  cited  by  which  for  the  first 
time  provision  was  made  for  a  complete  audit  of  expenditures 
by  an  officer  directly  responsible  to  Parliament.  An  important 
feature  of  this  act  was  the  consolidation  in  the  hands  of  one 
officer  of  the  two  functions  of  control  of  Exchequer  issues 
and  audit  of  expenditures,  which  until  then  had  been  in  the 
hands  of  separate  officers.  This  new  officer  to  whom  the 
two  duties  were  assigned  was  officially  styled  "Comptroller 
General  of  the  Receipt  and  Issue  of  Her  Majesty's  Exchequer 
and  Auditor  General  of  Public  Accounts,"  but  it  was  pro- 
vided by  the  act  that  he  might  be  designated  by  the  shorter 
title  of  "Comptroller  and  Auditor  General." 

Grant  of  "Credits"  to  the  Treasury.  Technically  public 
funds  are  held  by  the  Banks  of  England  and  Ireland  subject 
to  the  order  of  Parliament.  The  latter  by  statute  authorizes 
the  Crown  to  draw  upon  these  funds  for  the  payment  of  speci- 
fied obligations.  To  make  these  payments  the  first  step  to 
be  taken  by  the  Executive  is  to  get  possession  of  the  money, 
or,  what  is  the  same  thing,  establish  at  the  banks  its  authority 
to  draw  against  the  public  funds.  In  the  United  States  the 
procedure  employed  in  performing  this  operation  is  an  ex- 
ceedingly simple  one.  All  that  is  required  is  that  the  officers 
charged  with  the  disbursement  of  the  appropriations  shall, 
from  time  to  time,  as  they  have  need  of  funds,  make  requisi- 
tion upon  the  Comptroller  of  the  Treasury  for  the  issue  of 
warrants  directing  the  payment  to  them  of  the  sum  requisi- 

146 


DISBURSEMENT  OF  PUBLIC  FUNDS 

tioned.  The  Comptroller,  having  satisfied  himself  that  the 
money  has  been  duly  appropriated  for  the  purposes  set  forth 
in  the  requisition  and  that  there  is  a  balance  standing  to  the 
credit  of  such  appropriation  sufficient  in  amount  to  meet  the 
requisition,  executes  his  warrant  directing  the  Treasury  to 
pay  the  money  called  for,  and  upon  this  warrant  the  disbursing 
officer  receives  the  money. 

In  England  the  procedure  is  much  more  complicated.     The    In  England 
first  step  required  is  that  the  Treasury  shall  secure  formal    MuVrirst 
authority  to  requisition  funds.    This  is  done  by  securing  what   Get  Funds 
are  known  as  "credits"  upon  the  Exchequer.    In  securing  these 
credits  a  somewhat  different  procedure  has  to  be  followed  in 
respect  to  the  moneys  required  for  meeting  consolidated  fund 
services  and  those  for  meeting  the  supply  services.    To  secure 
the  first  the  Treasury  addresses  to  the  Comptroller  and  Auditor 
General  a  requisition  signed  by  two  Lords  of  the  Treasury, 
asking  that  the  necessary  credit  be  given  it  upon  the  Treas- 
ury.   If  the  Comptroller  and  Auditor  General  finds  the  requisi- 
tion a  proper  one,  he  approves  it  and  by  warrant  directs  that 
the  credit  be  granted. 

In  the  case  of  the  supply  services  the  same  procedure  is 
gone  through,  with  the  exception  that  before  the  requisition 
can  be  made  a  royal  order  must  be  secured  authorizing  the 
requisition.  This  arises  from  the  fact  that  in  form  the  supply 
has  been  granted  to  the  Sovereign.  As  the  latter  is  under  no 
legal  obligation  to  make  use  of  the  funds  so  placed  at  his  dis- 
position, unless  he  desires  to  do  so,  nothing  can  be  done  until 
he  has  signified  his  wish  that  the  money  be  placed  at  the  dis- 
posal of  the  Treasury. 

Issue  of  Money  from  the  Exchequer  to  "Principal  Account- 
ants." The  execution  of  the  foregoing  operations  does  not 
result  in  any  actual  issue  of  money  from  the  Exchequer.  It  Gives 
merely  gives  the  Treasury  the  right  to  order  such  issue.  The  a  R^ 
issues  themselves  are  made  only  to  officers  known  as  "princi-  Draw 
pal  accountants."  Principal  accountants  are  defined  by  the 

147 


BRITISH  FINANCIAL  ADMINISTRATION 


Funds 

Received 

from 

Principal 

Accountants 


Requisitions 
of  Principal 
Accountants 
Must  Be 
Endorsed 
by  the 
Treasury 


Exchequer  and  Audit  Departments  Act  as  "those  who  receive 
issues  directly  from  the  accounts  of  Her  Majesty's  Exchequer 
at  the  Banks  of  England  and  Ireland  respectively."  According 
to  Mr.  Henry  Higgs,  the  only  persons  coming  under  this  defi- 
nition, and  therefore  authorized  to  receive  money  from  the 
Exchequer,  are :  ( i )  The  Comptroller  General  of  the  National 
Debt,  and  the  chief  cashiers  of  the  Banks  of  England  and 
Ireland,  who  are  authorized  to  receive  money  from  the  Ex- 
chequer in  order  to  meet  the  payments  called  for  by  the  pub- 
lic debt  charges;  (2)  the  Accountants  General  of  the  revenue 
departments  who,  under  an  exceptional  arrangement  which 
will  be  more  fully  described  hereafter,  can  make  use  of  moneys 
collected  by  their  services  for  meeting  the  expenses  of  the 
latter,  though  from  a  bookkeeping  standpoint  the  money  is 
treated  as  passing  through  the  Exchequer;  and  (3)  an  officer 
known  as  Paymaster  General,  who,  with  the  exceptions  just 
noted  acts  as  a  general  paymaster  for  the  entire  Government 
service,  military  as  well  as  civil.1 

These  officers  secure  funds  by  making  formal  requisition 
therefor  upon  the  Treasury.  If  these  requisitions  are  found 
proper  the  Treasury  issues  orders  upon  the  custodian  banks 
to  transfer  the  money  called  for  from  the  credits  to  the  ac- 
counts of  these  principal  accountants.  It  will  thus  be  seen 
that  in  effect  the  money  is  first  transferred  to  the  Treasury 
and  by  the  latter  to  the  principal  accountants.  The  most  im- 
portant point  to  be  noted  in  respect  to  this  procedure  is  that 
the  Comptroller  and^  Auditor  General  does  not  intervene  in 
respect  to  the  payment  of  money  to  the  principal  accountants. 
He  has  exercised  his  power  of  control  in  the  granting  of 
credits  to  the  Treasury.2 

1  Henry  Higgs:    The  Financial   System  of  the  United  Kingdom, 
p.  68. 

2  For  copies  of  the  forms  used  by  the  Treasury  in  requesting  the 
grant  to  it  of  credits  by  the  Comptroller  and  Auditor  General,  in 
granting  them,  and  by  the  Treasury  in  directing  the  issue  of  money 
from   the   Exchequer   to   principal   accountants,   see   Henry   Higgs : 
The    Financial    System    of    the    United    Kingdom,    Appendix    VII, 
pp.  181-188. 

148 


DISBURSEMENT  OF  PUBLIC  FUNDS 

The  Paymaster  General.  Although,  as  we  have  pointed 
out,  there  are  three  classes  of  principal  accountants,  two  of 
them  have  such  specialized  duties  that  it  will  not  be  neces-  Chief 

_,  .  Paymaster 

sary  to  consider  them  further.     Treating  them  as  exceptions   Of  All 

to  a  general  rule,  as  they  are,  we  may  say  that  the  English   Obhgatlons 

system  of  disbursing  public   funds  rests  upon  the  principle 

of  having  a  single  Paymaster  General  for  the  whole  Govern- 

ment.    He  receives  the  money  from  the  Exchequer  that  is 

required  for  the  payment  of  public  obligations  and  makes  such 

payment  himself  or  advances  money  to  "sub-accountants"  for 

that  purpose.     Sub-accountants  are  defined  by  the  Exchequer 

and  Audit  Departments  Act  as  "those  who  receive  advances 

by  way  of  imprests  from  principal  accountants  or  who  re- 

ceive fees  or  other  public  moneys  through  other  channels." 

The  Paymaster  General,  it  will  be  noted,  is  in  no  sense  an 
accounting  officer.  He  has  nothing  to  do  with  the  examina- 
tion and  settlement  of  claims.  His  sole  function  is  that  of 
making  payment  of  orders  drawn  upon  him  by  accounting 
officers  proper.  His  responsibility  is  limited  to  that  of  satis- 
fying himself  that  the  orders  for  payment  are  in  due  form 
and  are  supported  by  the  proper  documents  as  required  by  law. 
As  set  forth  in  a  pamphlet  issued  by  the  Government  de- 
scriptive of  the  financial  machinery  of  the  Government  :  1 


The  Paymaster  General  fulfills  all  the  duties  of  a 
banker  for  the  various  public  departments,  with  certain  Officers 
exceptions.  The  moneys  issued  from  the  Exchequer  for 
the  various  services  are  paid  to  his  supply  account  at  the 
Bank  of  England.  For  each  of  the  Civil  Service  votes 
he  keeps  a  separate  account;  but  the  several  votes  for 
army  and  navy  services  are  included  in  accounts  under 
the  general  heads  of  "Army"  and  "Navy"  respectively. 
To  these  accounts  he  credits  the  sums  issued  from  the 
Exchequer,  and  debits  the  amount  of  the  various  orders 

1  "Control  and  Audit  of  Public  Receipts  and  Expenditures."   Printed 
for  His  Majesty's  Stationery  Offices,  London   (1907),  p.  8. 

149 


BRITISH  FINANCIAL  ADMINISTRATION 

or  cheques  drawn  on  him  by  the  several  accounting  offi- 
cers. The  Paymaster  General  forwards  to  the  several 
accounting  officers  the  vouchers  in  support  of  his  trans- 
actions on  their  accounts;  and  at  the  end  of  every  month 
furnishes  to  each  a  statement  of  account  showing  his 
receipts  and  payments  during  the  month  and  the  balance 
remaining  in  his  hands.  The  accounting  officer,  after 
examination  of  this  account,  forwards  to  the  Paymaster 
General  certificates  of  the  correctness  of  the  total 
amounts  of  the  receipts  and  payments  included  therein. 
These  certificates  are  subsequently  furnished  by  the  Pay- 
master General  as  vouchers  to  his  banking  account. 

Originally  there  were  a  number  of  paymasters,  one  for  the 
Army,  one  for  the  Navy,  and  a  number  for  the  several  civil 
services.  During  the  years  1830  to  1856  they  were  consoli- 
dated into  the  single  office  of  Paymaster  General.  The  main 
purpose  in  view  in  effecting  this  consolidation  was  that  of 
reducing  the  large  number  of  bank  balances  called  for  under 
the  old  system.  A  prime  feature  of  the  new  system  is  that, 
although  the  Paymaster  General  keeps  a  separate  account  in 
respect  to  each  vote  for  the  civil  services  and  a  separate  con- 
solidated account  with  each  of  the  departments  of  the  Army 
and  Navy,  he  keeps  but  one  general  balance  from  which  he 
makes  payments  on  account  of  all  the  votes.  This  means  that 
so  long  as  he  has  a  sufficient  balance  he  can  pay  any  order 
drawn  upon  him  regardless  of  the  vote  to  which  it  relates, 
whether  he  has  requisitioned  sufficient  funds  on  account  of 
that  vote  or  not.  Any  payment  on  account  of  a  vote  in  ex- 
cess of  the  sum  requisitioned  for  that  vote  is  subsequently 
adjusted  by  a  future  requisition. 

This  system,  when  first  established,  gave  rise  to  some  appre- 
hension that  it  would  cause  a  confusion  of  accounts  and  in 
some  way  would  weaken  control  of  the  House  of  Commons 
over  appropriations.  As  the  result  of  criticism  along  this  line 
the  Committee  on  Public  Monies  of  1856-1857  made  a  care- 

150 


DISBURSEMENT  OF  PUBLIC  FUNDS 

ful  investigation  of  the  workings  of  the  system,  with  the  re- 
sult that  it  gave  the  following  unqualified  endorsement.  It 
said: 

Your  Committee  are  satisfied,  from  the  evidence  taken 
before  them,  that  the  consolidation  of  the  Pay  Depart- 
ments has  been  attended  with  public  benefit;  that  it  has 
diminished  the  balances  left  in  the  hands  of  the  Public 
Accountants  to  the  Crown;  that  it  has  increased  the 
security  of  the  public  money  and  promoted  economy ;  and 
that  the  regulation  which  requires  the  Paymaster  General 
to  make  all  his  payments  from  a  single  cash  balance  has 
been  attended  with  beneficial  results.  As  the  issue  of 
money  from  the  Exchequer  in  amounts  sufficient  to  main- 
tain a  constant  balance  in  the  hands  of  the  Paymaster,  on 
each  separate  grant  or  head  of  service,  over  and  above 
the  balances  in  the  Exchequer  at  the  credit  of  such  grant 
and  service,  would  entirely  defeat  these  objects,  your 
Committee  recommend  that  issues  from  the  Exchequer 
shall  be  made  in  order  to  adjust  the  payments  under  every 
head  of  service  by  placing  each  in  credit  in  the  books  of 
the  Paymaster  as  frequently  as  possible,  consistently  with 
retaining  the  smallest  cash  balance,  and  that  such  an  ad- 
justment shall  be  completely  made,  at  least,  at  the  close 
of  every  month;  that  the  Paymaster  shall  be  required  to 
make  up,  for  the  Commissioners  of  audit,  accounts  to  the 
end  of  every  month,  showing  the  balances  for  or  against 
every  head  of  service;  and  that  any  provision  of  the 
Exchequer  Regulation  Act  of  1834  which  may  appear  to 
be  at  variance  with  this  mode  of  conducting  the  public 
payments  should  be  repealed.1 

Notwithstanding  this  endorsement,  criticism  of  the  system 
continued  to  be  made.  One  of  the  objections  upon  which 
special  stress  was  laid  was  that  the  system  destroyed  the  value 

1  Select  Committee  on  National  Expenditure,  Rep.  1902,  App.  13, 
p.  229. 


BRITISH  FINANCIAL  ADMINISTRATION 

of  the  reports  of  Exchequer  receipts  and  issues  as  a  means 
of  determining  national  income  and  expenditure.  On  Febru- 
ary 21,  1885,  the  Chancellor  of  the  Exchequer  took  advan- 
tage of  certain  questions  addressed  to  him  by  Mr.  W.  H.  Smith 
to  make  an  exceptionally  clear  and  full  statement  of  the  dis- 
bursing system  of  the  Treasury.  This  statement  was  sub- 
sequently published  as  a  treasury  minute.  The  importance  of 
the  subject  warrants  our  reproducing  here  the  more  important 
parts :  * 

The  Departments  of  the  State  obtain  money  for  public 
services  by  order  on  the  Paymaster  General;  the  service 
of  the  Public  Debt  and  of  the  Revenue  Departments  con- 
stituting almost  the  only  exceptions  to  this  rule. 

Sources  from  Which  Paymaster  Derives  His  Funds.2 
The  Paymaster  General  obtains  money  from  various 
sources:  (i)  He  receives  sums  realised  by  the  Depart- 
ments in  the  course  of  their  administration  (extra  re- 
ceipts rendered  available  as  appropriations  in  aid  without 
passing  through  the  Exchequer)  ;  (2)  He  holds  the  bal- 
ance for  the  time  being  of  the  large  fund,  called  the 
Treasury  Chest  Fund,  established  to  meet  temporarily 
expenditure  abroad;  (3)  He  holds  the  Civil  Contingen- 
cies Fund,  established  to  defray  provisionally  unforeseen 
expenditure  of  a  civil  character;  (4)  He  also  holds  large 
sums  on  account  of  what  are  called  Deposit  Funds  under 
the  control  of  different  Departments  of  the  State;  (5) 
He  is  supplied  day  by  day,  according  to  his  needs,  with 
money  from  the  Consolidated  Fund. 

Separation  of  Funds  on  Books  of  Paymaster  General, 
But  Only  One  Cash  Balance  Maintained.  These  various 

1  See  Epitome  of  Reports   from   Committees  of  Public  Accounts 
(1857-1910)  and  of  the  Treasury  Minutes  thereon,  pp.  174-183. 

2  The   marginal   headings   have   been   inserted  by  the   authors   of 
this   report   in  order  to  make   clearer  the   several   features   of   the 
system   described. 

152 


DISBURSEMENT  OF  PUBLIC  FUNDS 

heads  are  carefully  distinguished  as  separate  accounts  in 
his  books,  but  he  does  not  at  all  times  keep  a  separate 
cash  balance  upon  each  head.  All  receipts  under  the 
above  heads  are  treated  for  the  time  as  part  of  one  gen- 
eral cash  balance,  out  of  which  he  defrays,  day  by  day, 
the  orders  for  expenditure  served  upon  him;  thus  he 
exhausts  all  cash  received  from  without  before  he  applies 
to  the  Treasury  for  an  issue  from  the  Consolidated  Fund, 
and  it  follows  that  returns  of  issues  from  the  Consoli- 
dated Fund  do  not  fairly  represent  the  public  expenditure, 
except  at  prescribed  periodical  times  of  adjustment.  At 
those  times  issues  are  made  from  the  Consolidated  Fund 
which  enable  the  Paymaster  General  to  replace  all  the 
sums  of  which  he  has  made  temporary  use  for  the  public 
service. 

Special  System  for  the  Revenue  Departments.  Again, 
the  House  sanctions  in  Supply  the  expense  of  collecting 
the  revenue,  and  it  authorises  the  issue  out  of  the  Con- 
solidated Fund  to  the  Revenue  Departments  of  a  sum 
corresponding  to  the  amounts  thus  sanctioned.  The  Rev- 
enue Departments,  however,  except  in  the  case  of  the 
Telegraph  and  Packet  Service,  do  not  in  the  first  instance 
make  use  of  this  credit  on  the  Consolidated  Fund.  They 
defray  their  expenses  of  collection  out  of  the  revenue  as 
they  collect  it,  and  before  it  is  paid  into  the  Consolidated 
Fund.  At  regular  prescribed  intervals,  as  in  the  case  of 
the  Paymasters'  account,  the  accounts  between  the  Rev- 
enue and  the  Consolidated  Fund  are  adjusted.  The  Rev- 
enue Departments  present  to  the  Treasury  a  statement  of 
the  sums  which  they  have  expended,  and  provided  always 
that  such  sums  are  within  the  limits  of  the  Parliamentary 
authority,  the  Treasury  issues  corresponding  amounts  to 
the  Departments  out  of  the  proper  Votes,  and  the  Depart- 
ments repay  them  to  the  Consolidated  Fund  as  revenue 
in  adjustment  of  the  amounts  temporarily  used.  These 

153 


BRITISH  FINANCIAL  ADMINISTRATION 

methods  of  procedure  may  appear  somewhat  complicated 
in  description,  but  in  practice  they  are  extremely  simple. 
Money  is  used  upon  the  spot  where  it  comes  to  hand,  be- 
cause in  that  manner  it  can  be  used  most  economically. 
Subsequent  adjustment  of  account  between  the  Depart- 
ments and  the  Consolidated  Fund  brings  the  expenditure 
into  accord  with  the  Votes  of  the  House  of  Commons. 
If  that  adjustment  is  not  made,  if  the  directions  of  Acts 
of  Parliament  or  the  regulations  of  the  Service  are  not 
observed,  or  if  the  expenditure  exceeds  the  sums  granted 
by  the  House  of  Commons,  the  House  learns  the  fact 
through  its  own  officer,  the  Comptroller  and  Auditor  Gen- 
eral, and,  through  its  own  Committee  of  Public  Accounts, 
judges  the  infraction  of  law  or  regulation  thus  brought 
to  its  notice.  .  .  . 

Monthly,  Quarterly  and  Annual  Adjustment  of  Pay- 
master General's  Accounts.  An  adjustment  of  accounts 
(as  indicated  above)  of  a  general  character  takes  place 
monthly,  a  fairly  accurate  adjustment  takes  place  at  the 
close  of  each  quarter,  while  at  the  close  of  the  financial 
year  all  the  precautions  are  taken  which  inquiry  and  ex- 
perience can  suggest,  in  order  that  the  issues  from  the 
Consolidated  Fund  for  the  year,  as  declared  within  a  few 
hours  of  the  closing  of  the  books  on  the  3ist  March,  may 
correspond  as  closely  as  possible  with  the  finally  audited 
expenditure  as  declared  some  nine  or  ten  months  later  by 
the  Comptroller  and  Auditor  General. 

Use  of  Exchequer  Issues  for  Determination  of  Total 
Expenditures.  The  Board  is  aware  that  this  annual  ad- 
justment is  not  a  very  simple  matter;  but  its  general  ac- 
curacy is  of  considerable  importance.  The  expenditure 
which  is  given  in  the  Budget,  upon  which  Parliamentary 
accounts  are  based,  and  which  is  always  taken  as  the  pub- 
lic expenditure  in  discussion  by  Parliament  and  the  Press, 

154 


DISBURSEMENT  OF  PUBLIC  FUNDS 

is  not  final  expenditure  at  all ;  it  is  a  collection  of  imprests 
issued  out  of  the  Consolidated  Fund  to  the  various  spend- 
ing Departments  to  carry  on  a  service  which  in  several  of 
its  branches  is  spread  over  the  world.  It  is,  therefore, 
of  great  moment  that  these  issues  from  the  Consolidated 
Fund,  which  are  by  general  assent  accepted  as  represent- 
ing the  Public  Expenditure,  should  correspond  as  closely 
as  possible  with  the  expenditure  as  subsequently  ascer- 
tained by  the  Comptroller  and  Auditor  General.  .  .  . 

After  pointing  out  that  the  figures  for  next  year  showed 
that  the  difference  between  the  two  was  only  about  one  shilling 
in  five  hundred  or  one-fifth  of  one  per  cent,  the  minute  con- 
tinues : 

These  figures  speak  for  themselves ;  but  the  Chancellor 
of  the  Exchequer  must  remind  the  Board  that  this  accu- 
racy only  applies  to  the  issues  from  the  Consolidated  Fund 
after  the  adjustment  which  takes  place  from  time  to  time, 
and  notably  at  the  close  of  the  quarter  and  of  the  finan- 
cial year.  At  other  times  the  issues  from  the  Consol- 
idated Fund  would  not  be  found  to  correspond  so  closely 
with  the  actual  expenditure,  because  of  the  various  meth- 
ods adopted  for  economising  the  use  of  the  public  money. 
Hence  the  Returns  of  Issues  from  the  Consolidated 
Fund,  as  published  weekly,  must  not  be  accepted  at  other 
times  than  those  named  above  as  accurate  statements  of 
the  public  expenditure.  This  point  may  not  be  clearly 
apprehended  by  the  many  persons  interested  in  finance 
who  study  the  weekly  returns,  and  the  Chancellor  of  the 
Exchequer  therefore  lays  stress  upon  the  fact  that  the 
expenditure,  as  shown  in  the  returns,  represents  accu- 
rately indeed  the  issues  from  the  Consolidated  Fund,  but 
except  at  the  close  of  the  quarter  or  year  it  does  not  ac- 
curately represent  the  actual  expenditure.1 

1  Subsequent  to  the  date  upon  which  this  was  written  the  system 
of  appropriations  in  aid  has  been  greatly  developed,  the  result  of 

155 


BRITISH  FINANCIAL  ADMINISTRATION 


Paymasters 
Distin- 
guished from 
Accounting 
Officers 


One  Officer 
to  Audit 
Expenditure 
against 
Each  Vote 


Departmental  Accounting  Officers.  We  have  seen  that  un- 
der the  British  system  a  clear  distinction  is  made  between  the 
two  functions  of  paying  obligations  found  to  be  due  and  of 
determining  what  payments  are  so  due  and  payable.  The  first, 
as  we  have  pointed  out,  is  performed  by  officers  known  as 
"principal  accountants,"  who  are  really  not  accounting  officers 
at  all,  of  whom  the  Paymaster  General  is  the  most  important. 
The  second  is  performed  by  officers  who  are  known  as  "ac- 
counting officers"  or  "chief  accounting  officers."  Technically 
an  accounting  officer  is  the  officer  charged  with  the  duty  and 
responsibility  for  the  expenditure  of  a  vote  and  of  rendering 
an  account  of  the  manner  in  which  this  duty  is  performed. 
This  he  does  by  the  preparation  and  transmission  to  the  Comp- 
troller and  Auditor  General  of  an  account  in  which  the  ex- 
penditure of  the  vote  is  set  forth  in  detail  according  to  the 
subheads  enumerated  in  the  estimates.  These  accounts,  when 
audited  by  the  Comptroller  and  Auditor  General,  are  laid  be- 
fore Parliament  as  the  appropriation  accounts  for  the  year. 

An  accounting  officer  is  designated  for  each  vote.  Theo- 
retically there  might  be  as  many  accounting  officers  as  there 
are  votes.  Actually,  however,  the  same  person  is  usually  made 
the  accounting  officer  for  all  the  votes  for  a  department  or 
other  important  branch  of  the  public  service.  The  result  is 
to  give  to  each  department  or  important  branch  of  the  public 
service  one  official  charged  with  the  duty  of  rendering  an  ac- 
count of  the  manner  in  which  all  the  funds  of  that  department 
or  service  are  expended. 

This  duty  of  rendering  an  account  of  the  manner  in  which 
funds  are  expended  constitutes  but  a  part  of  the  duties  of  this 
officer.  Following  the  principle  of  concentrating  financial  re- 
sponsibility as  far  as  possible,  this  officer  is  charged  with  the 
supervision  and  control  of  all  the  financial  operations  of  the 

which  is  to  exclude  from  Exchequer  receipts  and  issues  important 
sums  received  by  the  department  as  excess,  or  extra  receipts,  and 
directly  applied  by  them  in  the  way  of  additions  to  parliamentary 
grants. 

156 


DISBURSEMENT  OF  PUBLIC  FUNDS 

department  to  which  he  is  attached.     He  is  the  officer  whose  An  Auditor 
approval  is  required  before  any  expenditure  of  funds  can  be   Money 
made  or  liability  entered  into.     Moreover,  as  has  been  de-  Transaction 
scribed,  he  is  the  official  to  whom  are  addressed  the  estimates 
circular  of  the  Treasury  and  who  has  full  charge  and  responsi- 
bility for  the  preparation  of  the  estimates. 

In  this  officer  the  British  system  makes  provision  for  an 
official,  or  rather  set  of  officials,  who  have  no  counterpart  in 
the  federal  service  of  the  United  States.  The  nearest  analogue 
to  this  office  is  that  of  the  disbursing  officers  attached  to  the 
several  departments  and  bureaus  of  the  federal  departments. 
The  accounting  officers  of  the  British  Government,  however,  ^°s^m 
differ  radically  from  these  officers  in  two  fundamental  re-  Differs  from 
spects.  In  the  first  place  the  accounting  officers  are  not  dis-  practice 
bursing  officers;  they  make  no  payments  themselves;  they 
merely  determine  what  payments  should  be  made.  Under  the 
American  system  the  disbursing  officers  both  determine  what 
payments  are  due  and  make  such  payments.  In  the  second 
place  the  accounting  officer,  under  the  English  system,  is  an 
official  of  far  greater  dignity,  official  status,  and  responsibility 
than  the  disbursing  officer  under  the  American  system.  The 
American  disbursing  officer  is  little  more  than  an  expert  ac- 
countant with  the  duty  of  seeing  that  all  legal  requirements 
are  met  before  payment  of  a  claim  is  made.  He  has  little  or  no 
duty  in  respect  to  the  determination  of  what  expenditures  shall 
be  authorized,  other  than  the  technical  one  of  seeing  that  they 
fall  within  the  provisions  of  the  appropriation.  Though  his 
advice  may  be  relied  upon  to  a  greater  or  less  extent  by  the 
head  of  a  department  in  respect  to  the  incurring  of  obligations, 
and  suggestions  from  him  looking  to  the  effecting  of  economies 
may  be  welcomed,  the  giving  of  such  advice  and  suggestions 
constitutes  no  part  of  his  official  duties.  Only  in  a  very  lim- 
ited degree,  therefore,  is  he  responsible  for  the  preparation  of 
the  estimates  setting  forth  the  financial  needs  of  the  service 
or  for  the  economy  and  efficiency  with  which  the  funds  granted 
are  expended. 

157 


BRITISH  FINANCIAL  ADMINISTRATION 


High 

Dignity  of 
English 
Accounting 
Officer 


Inquiry 
into  Work 
of  Account- 
ing Officers 


The  English  accounting  officer,  on  the  other  hand,  is  the 
one  responsible  financial  officer  of  the  service  to  which  he  be- 
longs. He  has  entire  charge  of  the  financial  operations  of  his 
service.  He  is  responsible  for  the  collection  of  the  extra  re- 
ceipts of  the  service,  all  expenditures  and  the  rendition  of 
the  accounts.  His  duties  pertain  not  only  to  the  settling  of 
accounts,  but  to  the  incurring  of  the  obligations  in  the  first 
instance.  He  has  the  duty  of  seeing  not  only  that  the  law  is 
strictly  complied  with,  but  that  all  expenditures  are  made  to 
the  best  possible  advantage.  He  is  in  every  sense  the  finan- 
cial watchdog  of  his  service,  and  the  one  upon  whom  definitely 
rests  responsibility  for  the  efficiency  and  economy  with  which 
the  affairs  of  the  department  are  managed  and  the  funds  esti- 
mated for  and  expended.  He  is,  in  a  word,  the  permanent 
financial  secretary  of  his  department. 

It  is  impossible  to  lay  too  great  stress  upon  the  importance 
of  this  officer  from  the  standpoint  of  securing  efficiency  and 
economy  in  the  expenditure  of  public  money.  Valuable  as  is 
the  control  over  expenditures  exercised  by  the  Treasury,  such 
control  cannot  possibly  reach  the  point  of  ensuring  that  ex- 
penditures in  all  cases  correspond  to  real  needs,  or  that  the 
maximum  return  for  expenditures  is  had  in  the  way  of  serv- 
ices rendered  or  goods  received.  These  are  features  of  con- 
trol that  must  primarily  be  exercised  inside  the  several  ad- 
ministrative services.  In  making  provision  for  an  officer  of 
this  character,  in  defining  the  scope  of  his  duties  and  powers, 
in  giving  to  him  a  position  of  high  dignity  and  authority,  and  in 
concentrating  upon  him  all  financial  responsibility,  the  British 
system  has  gone  as  far  as  it  seems  possible  to  go  in  meeting  this 
primary  requisite  for  an  economical  and  efficient  administra- 
tion of  financial  affairs. 

This  matter  of  the  responsibility  of  accounting  officers  in 
respect  to  the  incurring  of  obligations  and  of  seeing  that 
moneys  voted  are  expended  to  the  greatest  possible  advantage 
was  carefully  inquired  into  by  the  Committee  on  National  Ex- 
penditure of  1902.  All  of  the  accounting  officers  who  were 

158 


DISBURSEMENT  OF  PUBLIC  FUNDS 

called  upon  to  testify  regarding  their  duties  were  emphatic  in 
stating  that  they  considered  the  exercise  of  such  discretion 
as  clearly  within  the  scope  of  their  duties.  Treasury  officials, 
in  giving  their  evidence,  testified  to  the  same  effect.  Though 
anxious  to  magnify  the  effectiveness  of  treasury  control,  they 
nevertheless  stated  that  their  control  largely  ceased  at  the  point 
where  the  wisdom  of  the  expenditure  was  determined;  that 
they  had  to  look  to  the  accounting  officers  of  the  several  de- 
partments to  see  that  the  moneys  devoted  to  these  purposes 
were  applied  to  the  best  advantage.  Thus  Mr.  Robert 
Chalmers,  one  of  the  principal  clerks  in  the  Treasury,  that 
is,  one  of  the  officials  through  whom  control  over  expenditures 
is  exercised  by  the  Treasury,  when  asked  the  question:  Now 
I  want  to  ask  you  a  question  with  regard  to  the  Accounting 
Officers  of  the  Departments  over  which  you  exercise  control. 
To  what  extent  are  they  financial  controllers,  or  financial 
officers  exercising  power  in  the  interests  of  financial  control? 
replied : 

"They  undoubtedly  do  act  very  much  indeed  in  the 
direction  of  financial  control.  We  undoubtedly  look  to 
the  Accountant  General  of  the  Army  and  the  Accountant 

General'  of  the  Navy  as  the  people  inside  the  Department  Report  of 

Committee 

whose  disposition  is  towards  economy,  and  who  do  scru- 
tinise expenditure  to  see  that  the  money  expended  is  ex- 
pended to  the  best  advantage ;  and  I  believe  if  you  inquire 
from  the  Accountants  General  of  the  Army  and  Navy, 
you  will  find  that  that  is  a  very  considerable  portion  of 
their  work,  and  that  they  understand  it  to  be  within  the 
scope  of  their  duty."  1 

Regarding  the  fact  that  the  accounting  officer  is  directly  re- 
sponsible for  the  management  of  the  financial  affairs  of  his  Treasury 
department,  and  that  this  responsibility  is  a  real  and  not  a 
nominal  one  and  cannot  be  shifted  to  the  shoulders  of  subordi-  Duties 
nates,  the  Treasury  Minute  of  August  14,  1872,  through  which 

Report  of  Committee  on  National  Expenditure  (1902),  p.  30. 

159 


BRITISH  FINANCIAL  ADMINISTRATION 

the  present  system  was  definitely  established,  is  very  emphatic. 
It  reads : x 

He  signs  the  Appropriation  Account,  and  thereby 
makes  himself  responsible  for  its  correctness.  This  offi- 
cer is  the  person  whom  Parliament  and  the  Treasury 
regard  as  primarily  responsible  for  the  balance  in  the 
custody  of  the  department,  although  he  himself  may  not 
hold  one  farthing  of  it.  In  respect  of  him,  every  person 
having  charge  of  any  portion  of  the  money  issued  to,  or 
received  on  behalf  of,  the  department,  is  simply  in  the 
position  of  a  subaccounting  officer.  It  cannot  be  too  dis- 
tinctly announced  that  responsibility  for  the  proper  con- 
duct of  financial  business  cannot  be  delegated  to  the  sub- 
ordinate officers  who  may  be  placed  in  charge  of  the  De- 
partmental Accounts.  The  signature  appended  to  the 
Appropriation  Account  would  be  otherwise  an  idle  form, 
calculated  only  to  mislead  Parliament. 

Manifestly  an  officer  having  this  large  responsibility  should 
be  one  having  a  position  of  corresponding  dignity  and  power. 
Thus  the  Treasury  Minute  from  which  we  have  just  quoted 
says : 2 

It  cannot  be  doubted  that  the  officer  entrusted  with  the 
duty  should  occupy  a  sufficient  standing  to  enable  him 
not  only  to  exercise  a  direct  supervision  and  control  over 
the  persons  executing  the  detailed  business  of  account 
and  bookkeeping,  but  also  to  influence  the  working  of  his 
department  in  all  those  respects  which  affect  the  method 
of  its  receipts  or  expenditure.  He  must  also  be  qualified 
to  represent  his  department  before  the  Parliamentary 
Committee  of  Public  Accounts.  These  conditions  are 
satisfied  in  the  permanent  chiefs  of  the  various  depart- 
ments. They  are  responsible  for  the  general  conduct  and 

1  Epitome  of  the  Reports  from  the  Committee  of  Public  Accounts 
(1857-1910)  and  of  the  Treasury  Minutes  thereon,  pp.  31-32. 

2  Epitome,  etc.,  p.  34. 

160 


DISBURSEMENT  OF  PUBLIC  FUNDS 

for  the  discipline  of  their  departments.  They  have  the 
best  means  of  acquiring  a  personal  knowledge  of  the  staff 
placed  under  their  orders,  and  their  functions  would  be 
logically  incomplete  if  they  were  not  held  responsible  for 
the  due  discharge  of  financial  as  well  as  other  business 
transacted  in  their  departments. 

My  Lords  (of  the  Treasury)  are  therefore  prepared 
to  lay  down  the  rule  that,  in  the  exercise  of  the  powers 
conferred  upon  them  by  the  Exchequer  and  Audit  Act, 
they  will  nominate,  whenever  it  is  practicable,  the  perma- 
nent heads  of  the  departments  to  render  the  Appropria- 
tion Accounts  of  grants  for  the  services  under  their  con- 
trol. As,  however,  there  may  be  reasons  for  making,  in 
some  instances,  exceptions  to  this  rule,  my  Lords  will 
not  issue  final  directions  until  an  opportunity  has  been 
afforded  to  the  departments  to  express  an  opinion  upon 
the  proposal,  and  they  will  be  prepared  to  give  their  care- 
ful consideration  to  any  representation  which  may  be 
made  to  them. 

This  quotation  brings  out  two  important  features  of  this  Accounting 
system.  The  first  is  that  the  designation  of  the  accounting  Responsible 
officer  is  made  by  the  Treasury  and  not  by  the  department  for  J£  ^ 
which  he  acts.  It  would  seem  almost  as  though  the  theory 
was  that  responsibility  for  the  conduct  of  the  financial  affairs 
of  the  several  departments  rested  primarily  on  the  Treasury 
and  that  in  discharging  this  responsibility  it  designated  a  high 
official  in  each  department  to  act  as  its  agent.  The  second  is 
that  the  policy  is  pursued  of  vesting  financial  responsibility, 
as  far  as  possible,  in  the  hands  of  the  officer  exercising  admin- 
istrative responsibility.  This  means  that  the  persons  responsi- 
ble for  the  preparation  of  the  estimates  and  the  rendering  of 
the  accounts  shall  be  the  ones  responsible  for  the  authorizing 
of  the  incurring  of  liabilities  and  the  approval  of  expenditures. 
It  follows  from  this  that  the  responsibility  of  this  officer  is 
not  a  mere  technical  one  such  as  would  be  the  responsibility 

161 


Command 
of  Superior 
Officer  No 
Defence  in 
United 
States 


In  England 
Responsi- 
bility 
Centralized 


of  an  accountant  or  disbursing  officer  of  the  ordinary  type,  but 
one  comprehending  the  discretion  and  judgment  displayed  in 
determining  needs  and  in  expending  funds.  In  a  word,  it 
brings  responsibility  home  to  the  person  upon  whom  such 
responsibility  rests. 

Personal  Liability  of  Accounting  Officers.  An  important 
feature  of  any  disbursing  system  is  the  extent  to  which  the 
officer  making  or  authorizing  the  expenditures  is  personally 
and  pecuniarily  responsible  for  any  improper  payments  made 
or  authorized  by  him,  and  the  manner  in  which  this  liability 
can  be  avoided  or  discharged.  In  the  United  States  Govern- 
ment the  disbursing  officer  is  not  only  personally  liable  for  all 
improper  payments  made  by  him,  but  this  liability  extends  even 
to  those  cases  where  he  makes  the  payment  under  protest  on 
the  command  of  a  superior  officer.  He  is  thus  placed  in  the 
peculiar  position  that  at  times  he  has  to  choose  between  re- 
fusing to  make  a  payment  ordered  by  his  superior  and  thereby 
incurring  the  displeasure  of  the  latter  or  even  running  the  risk 
of  dismissal  from  his  office,  or  of  making  the  payment  and 
running  the  risk  of  having  the  item  disallowed  in  his  accounts 
and  then  being  held  responsible  financially  for  the  payment. 
The  law,  in  other  words,  is  that  a  disbursing  officer  cannot 
allege  a  command  from  a  superior  officer  as  justification  for 
making  a  payment. 

In  England  the  law  is  different.  Under  the  British  system 
the  accounting  officer  can  relieve  himself  of  liability  in  all 
cases  when  he  has  made  a  payment  upon  the  command  of  a 
superior  officer,  provided  he  can  show  that  before  he  did  so 
he  made  a  formal  protest  against  such  action.  This  point,  con- 
cerning which  there  was  for  some  years  considerable  uncer- 
tainty, was  finally  cleared  up  by  a  circular  letter  addressed 
to  all  accounting  officers  by  the  Treasury  in  1883.  This  cir- 
cular reads : * 

1  Epitome  of  the  Reports  from  Committee  of  Public  Accounts 
(1857-1910)  and  of  the  Treasury  Minutes  thereon,  p.  132. 

162 


DISBURSEMENT  OF  PUBLIC  FUNDS 

Accounting  Officers  will  understand  that  if  they  are 
desired  by  their  superior  officers  to  order  a  payment 
which,  under  Act  of  Parliament,  Order  in  Council, 
Queen's  Warrant,  Treasury  Minute,  or  otherwise,  they  Subject 
believe  to  be  wrong,  they  must  represent  their  objection, 
and  the  reason  for  it,  to  such  superior  officer  in  writing. 
If  the  order  is  then  repeated  in  writing,  they  may  obey 
without  further  responsibility,  but  if  the  officer  directing 
the  payment  is  not  the  supreme  chief  of  the  Department 
they  should  ask  to  obtain  the  authority  in  writing  of  such 
chief  before  obeying.  The  responsibility  is  then  trans- 
ferred to  the  directing  officer,  who  will  be  held  person- 
ally liable. 

This  principle,  the  commission  believes,  is  the  correct  one. 
It  should  be  stated  that  under  the  American  system  the  dis- 
bursing officer  has  the  right,  in  all  cases  where  he  is  doubtful 
of  the  propriety  of  making  a  payment,  to  call  for  the  opinion 
of  the  Auditor,  and,  if  need  be,  of  the  Comptroller,  before 
making  the  payment.  It  is  doubtful  whether  many,  if  any, 
cases  occur  where  a  disbursing  officer  is  directed  to  make  a 
payment  after  the  Auditor  or  Comptroller  has  declared  such 
a  payment  to  be  an  improper  one. 

Accounting  Officers  Not  Bonded.  Another  feature  in  re- 
spect to  which  the  British  system  differs  from  that  of  the 
United  States  is  in  respect  to  the  matter  of  requirement  of 
bonds  from  financial  officers.  In  the  United  States  Govern- 
ment disbursing  officers  are  required  to  give  heavy  bonds  con- 
ditioned upon  their  giving  a  full  accounting  for  all  moneys  British 
coming  into  their  hands  and  for  all  payments  made  by  them, 


In  England  no  bonds  are  required  of  accounting  officers.    The   Own 

.  .  .  Insurance 

explanation  given  why  no  such  requirement  exists  is  that  the 
Government  has  ample  protection  in  the  high  positions  occu- 
pied by  these  officers,  in  the  fact  that  these  positions  are  only 
reached  after  years  of  service  during  which  the  integrity  and 

163 


BRITISH  FINANCIAL  ADMINISTRATION 

ability  of  the  incumbent  have  been  thoroughly  tested,  and  in 
the  sums  of  money  in  possession  of  the  Government  repre- 
sented by  the  accrued  value  of  the  service  pensions  to  which 
the  accounting  officers  are  entitled  upon  retirement.  Certain 
it  is  that  in  practice  the  British  Government  has  suffered  little 
or  no  loss  through  the  inefficiency  or  misconduct  of  these 
officers. 


CHAPTER  VIII 
TREASURY  CONTROL  OVER  EXPENDITURES 

MB 

Expenditure  of  Appropriations  Not  Mandatory;  The  Treasury  the 
Authority  for  the  Authorization  of  Expenditures;  Treasury  Con- 
trol Over  Organization  and  Personnel;  Treasury  Control  Over  Ex- 
penditures for  Quarters,  Equipment,  Supplies,  etc. ;  Organization  of 
the  Treasury  for  the  Exercise  of  Its  Powers  of  Control;  Treasury 
Use  of  Departmental  and  Interdepartmental  Committees  of  Investi- 
gation; The  Treasury  as  a  General  Organ  of  Administrative  Con- 
trol. 

In  our  consideration  of  the  manner  in  which  the  estimates 
are  prepared  and  submitted  to  Parliament,  we  have  seen  that, 
subject  to  a  possible  appeal  to  the  Cabinet  as  a  whole,  the  Treas- 
ury exercises  complete  control  in  respect  of  the  determination 
of  the  funds  that  Parliament  shall  be  asked  to  grant  to  the 
Crown  for  the  conduct  of  the  Government.  We  have  now 
to  consider  the  powers  possessed  by  this  department  in  con- 
trolling the  expenditure  of  these  funds  after  they  are  granted. 
Great  as  are  the  powers  of  the  Treasury  over  estimates,  we 
will  find  them  scarcely  less  over  expenditure. 

Expenditure  of  Appropriations  Not  Mandatory.    The  start- 
ing point  in  considering  this  phase  of  the  functions  of  the 
Treasury  is  the  recognition  of  the  fact  that  under  the  Eng- 
lish system  the  expenditure  of  appropriations  is  not  manda- 
tory.    In  form  appropriations  are  mere  grants  to  the  Crown  Authority 
to  be  used  by  the  latter  as  required  for  the  conduct  of  the  Gov-  to  Spend  a 
ernment.    As  Maitland  picturesquely  puts  it : x  Command  * 

"Money  is  granted  to  the  queen ;  it  is  placed  at  the  dis- 
posal of  her  and  her  ministers.     But  she  and  they  are  not 
bound  by  law  to  spend  it,  at  least  not  bound  by  the  Ap- 
1  F.  W.  Maitland :    Constitutional  History  of  England,  pp.  445-446. 

165 


BRITISH  FINANCIAL  ADMINISTRATION 


Mandate 
Must  Come 
from 
Executive 


propriation  Act.  Of  course,  if  the  queen's  advisers  with- 
drew all  ambassadors  from  foreign  courts,  or  disbanded 
the  navy  or  the  like,  they  might  be  severely  blamed  and 
possibly  they  might  be  impeached.  But  statute  does  not 
say  to  the  queen:  'You  shall  spend  so  much  on  your 
embassies,  so  much  on  your  navy.'  Rather  its  language 
is :  'Here  is  money  for  this  purpose  and  for  that ;  spend 
it  as  you  please;  we  trust  the  discretion  of  your  advisers; 
the  account  of  the  expenditure  will  be  presented  to  us, 
and  votes  of  censure  may  follow.'  .  .  .  The  fact  that  par- 
liament has  voted  a  supply  to  the  queen  for  the  payment 
of  such  salaries  or  pensions  does  not  give  them  a  remedy 
against  the  lords  of  the  treasury  or  the  secretaries  of 
state  who  are  charged  with  the  expenditure.  No  one  can 
say :  'Under  the  Appropriation  Act,  the  secretary  of  state 
for  war  or  the  lords  of  the  admiralty,  have  received 
money  which  they  hold  upon  trust  for  me.' ' 

The  Treasury  the  Authority  for  the  Authorization  of  Ex- 
penditures. It  follows  from  this  principle  that  something  more 
than  the  mere  appropriation  of  funds  is  required  by  the  serv- 
ices before  they  can  proceed  to  the  expenditure  of  the  funds 
that  have  been  granted  to  the  Government  for  their  support. 
As  the  funds  have  been  granted  to  the  Crown  the  Crown  must 
indicate  the  desire  that  the  money  shall  be  s'pent.  It  is  at  this 
point  that  the  power  of  the  Treasury  to  control  expenditures 
enters.  Just  as  the  Treasury  is  the  organ  through  which  the 
Crown  formulates  and  makes  known  its  wishes  regarding  its 
financial  needs,  so  it  is  the  organ  through  which  the  Crown 
afterwards  determines  the  extent  to  which  it  will  utilize  the 
funds  that  have  been  granted  to  it  and  the  conditions  that  shall 
be  observed  in  their  utilization.  Moreover,  just  as  the  power 
of  the  Treasury  to  frame  estimates  is  not  a  nominal  one,  but 
carries  with  it  the  exercise  of  a  determining  voice  as  to  what 
funds  shall  be  asked  for,  so  this  second  and  complementary 
function  of  controlling  expenditures  is  equally  a  real  one. 

166 


TREASURY  CONTROL  OVER  EXPENDITURES 

Theoretically  every  expenditure,  as  every  estimate,  must 
receive  a  treasury  sanction.  In  practice  this  means  that  when 
the  expenditures  contemplated  are  for  purposes  that  have  pre-  by  Treasury 
viously  been  authorized,  and  do  not  call  for  a  larger  sum  than 
has  already  been  approved,  treasury  sanction  will  be  taken 
for  granted,  unless  the  Treasury  has  for  some  reason  decided 
that  a  retrenchment  is  necessary  and  so  directs.  But  where 
any  departure  from  prior  practice  is  proposed,  the  employment 
of  a  single  additional  clerk,  the  undertaking  of  any  new  work, 
the  express  sanction  of  the  Treasury  must  first  be  obtained 
before  any  action  can  be  had.  Speaking  to  this  point,  Mr. 
William  Blain,  clerk  in  charge  of  estimates  in  the  Treasury 
Department,  in  his  testimony  before  the  Committee  on  Na- 
tional Expenditure  of  1902,  said : * 

"Apart  from  what  one  may  call  the  necessary  normal 
expenditure  of  the  Department,  new  proposals,  new  de- 
partures, and  new  programmes  must  always  come  to  the. 
Treasury  for  sanction,  and  that  is  quite  a  separate  mat- 
ter from  the  approval  of  the  Estimates.  .  .  .  The  pass- 
ing of  the  Estimate  does  not  necessarily  sanction  the 
expenditure.  Taking  the  case  of  an  Establishment  (i.  e., 
a  personnel)  beyond  its  necessary  strength,  the  mere  fact 
that  the  Treasury  have  approved  of  the  Estimate  which 
the  Department  was  submitting  to  Parliament  would  not 
authorise  the  Department  to  increase  its  establishment. 
If  the  Estimate  contained  an  establishment  showing  an 
increase  over  that  of  the  previous  year,  they  would  still 
have  to  get  a  separate  Treasury  sanction  for  the  increase 
of  that  establishment,  and  the  Audit  Office  would  not 
pass  its  expenditure  without  that." 

Another  leading  authority  on  the  British  financial  system 
puts  it  in  this  way,  2 

1  Report  of  the  Committee  on  National  Expenditure,   1902,  p.  3. 

2  Henry  Higgs :    The  Financial  System  of  the  United  Kingdom, 
pp.   82-83. 

167 


BRITISH  FINANCIAL  ADMINISTRATION 


Powers  of 
Control 
Independent 
of 

Expending 
Depart- 
ments 


"The  powers  of  the  Treasury  are  very  great,  resting 
partly  upon  the  prerogative  of  the  Crown  in  so  far  as  the 
exercise  is  committed  to  the  Treasury  in  the  matters  of 
finance,  and  partly  upon  a  variety  of  statutes.  Section 
27  of  the  Exchequer  and  Audit  Act,  1866,  gives  it  prac- 
tical control  over  the  whole  public  expenditure  and  en- 
ables it  to  require  that  any  measure  tending  to  increase 
that  expenditure  should  be  submitted  for  its  concurrence 
before  it  is  adopted  under  pain  of  being  disallowed.  Pro- 
posals for  the  increase  of  establishments  (i.  e.,  personnel), 
increased  rates  of  pay,  additional  services  or  new  works, 
require  Treasury  sanction,  and  are  questioned  by  the 
Auditor  General  if  they  are  put  in  force  without  the  au- 
thority of  the  Treasury.  By  reason  of  its  central  posi- 
tion the  Treasury  undertakes  the  regulation,  of  general 
questions  affecting  the  organisation  of  the  Civil  Service 
at  large,  prepares  Orders  in  Council  governing  the  serv- 
ice, and  issues  circulars  designed  to  promote  uniformity 
in  the  treatment  of  officials  in  different  departments. 
The  bulk  of  its  departmental  business  consists  of  the  con- 
trol of  expenditure  by  the  examination  of  proposals  for 
increased  pay  or  establishments  or  new  services,  for  all 
which  it  requires  full  justification,  and  the  award  of  pen- 
sions for  the  Civil  Services." 

In  weighing  the  significance  of  these  broad  powers  of  finan- 
cial control  it  is  important  to  appreciate  that  they  exercise 
them  not  in  the  way  of  approving  expenditures  proper,  that 
is,  in  passing  upon  orders,  vouchers,  contracts,  etc.,  but  in  the 
approval  or  disapproval  of  actions  which  will  give  rise  to  the 
necessity  for  increased  expenditures.  Its  control,  in  a  word,  is 
one  over  the  incurring  of  liabilities,  over  the  program  of  work, 
the  plant,  organization,  personnel,  equipment,  etc.,  that  shall  be 
employed  for  the  conduct  of  Government  operations.  Its  power 
in  respect  to  these  matters  is  practically  absolute.  Through  it 
and  through  the  approval  of  proposals  for  the  expenditure  of 

1 68 


TREASURY  CONTROL  OVER  EXPENDITURES 

funds,  the  Treasury  thus  is  in  effect  a  general  board  of  admin- 
istrative control.  Among  the  many  striking  features  of  the 
British  financial  system  none  is  more  noteworthy  than  this. 
It  is  our  purpose,  therefore,  to  consider  in  some  detail  the  man- 
ner in  which  the  Treasury  exercises  this  exceedingly  important 
function. 

Treasury  Control  Over  Organisation  and  Personnel.  The 
estimates,  as  we  have  seen,  contain  tables  showing  for  each 
service  the  number  and  compensation  of  all  employees  to  be  ity  for  Or- 
provided  for.  These  detailed  statements  of  organization  and  gan 
personnel  are,  however,  purely  for  purposes  of  information. 
Legislative  determination  of  how  the  services  shall  be  organ- 
ized and  the  number  and  compensation  of  employees  goes 
no  further  than  the  allotment  of  lump  sums  for  the  subhead 
"Salaries  and  Wages,"  and  even  this  allotment  can  -be  changed 
through  the  effecting  of  transfers  from  one  subhead  to  an- 
other upon  the  approval  of  the  Treasury  being  obtained. 
Though  Parliament  is  thus  given  as  full  information  regard- 
ing organization  and  personnel  as  is  furnished  by  the  esti- 
mates of  the  United  States  Government  to  Congress,  there  ex- 
ists nothing  approaching  the  practice  of  the  latter  body  of 
appropriating  in  detail  for  specific  positions  and  rates  of  com- 
pensation. Under  the  British  system  practically  the  whole 
matter  of  organization  and  personnel  is  left  to  executive  de-  Treasury 

Control 

termination.  Agent  of 

The  authority  through  which  this  determination  is  had  is 
the  Treasury.  Though  there  are  general  statutes  governing 
the  classification  and  compensation  of  personnel,  practically 
full  discretion  is  exercised  by  the  Treasury  in  applying  these 
general  rules  to  particular  services.  The  organization  and  per- 
sonnel that  each  service  now  has  is  the  result  of  past  action  on 
the  part  of  the  Treasury.  This  organization  and  personnel  each 
service  retains  until  it  has  received  an  authorization  from  the 
Treasury  to  effect  a  change  in  respect  to  them.  It  results  from 
this  that  the  Treasury  is  constantly  passing  upon  applications 

169 


BRITISH  FINANCIAL  ADMINISTRATION 

for  changes  and  is  thus  constantly  passing  in  review  the  admin- 
istrative organization  and  problems  of  the  several  services. 

It  is  hardly  necessary  for  us  to  point  out  how  effective  a 
system  of  control  this  procedure  provides  and  how  it  dovetails 
into  the  work  of  the  Treasury  in  determining  the  estimates 
that  shall  be  put  forward  each  year.  It  means  that  no  in- 
crease can  be  made  until  an  independent  authority  has  been 
convinced  of  its  necessity.  The  mere  fact  that  all  increases 
must  be  so  justified  even  though  approval  may  follow  almost 
as  a  matter  of  course — which,  however,  is  by  no  means  the  case 
— constitutes  a  powerful  deterrent  upon  increases  not  war- 
ranted by  the  public  needs. 

Neither  is  it  necessary  to  dwell  upon  the  superiority  of  this 
system  over  the  one  obtaining  in  the  United  States,  where  the 
attempt  is  made  to  determine  in  detail  the  number  and  compen- 
sation of  the  personnel  of  each  office  by  legislative  act.  Under 
the  British  system  this  determination  is  made  by  an  authority 
in  intimate  and  constant  touch  with  the  working  conditions 
of  each  service  and  thus  technically  competent  to  perform  this 
difficult  task;  and  the  determination  is  made  item  by  item  as 
needs  for  changes  arise.  The  system  resulting  is  thus  one  in 
which  strict  control  is  combined  with  great  flexibility.  Un- 
der the  American  system  this  operation  is  performed  by  a 
body  with  a  fluctuating  personnel  not  directly  or  currently 
in  touch  with  administrative  problems;  the  determination  is 
had  at  one  time,  months  in  advance  of  the  time  when  the  de- 
cision made  will  go  into  effect,  and  no  provision  is  made  for 
effecting  readjustments  as  new  conditions  present  themselves. 
Knowing  this,  each  service  seeks  to  obtain  the  maximum  force 
that  it  can  persuade  Congress  to  grant  it,  in  order  that  it  may 
be  on  the  safe  side.  To  the  British  system  of  effective  control 
and  great  flexibility  the  United  States  opposes  one  of  ineffec- 
tive control  and  great  rigidity. 

Treasury  Control  Over  Expenditures  for  Quarters,  Equip- 
ment, Supplies,  etc.  Practically  the  same  principles  which  we 

170 


TREASURY  CONTROL  OVER  EXPENDITURES 

have  set  forth  as  governing  expenditures  for  personnel  apply 
with  respect  to  expenditures  for  quarters,  equipment,  supplies,  Control 
and  like  objects.     In  performing  the  function  of  control  in  Purchase 
respect  to  these  classes  of  expenditure  the  Treasury,  however,   and  c"9- 
makes  use  of  two  special  organs:     His  Majesty's  Stationery  Material 
Office,  which  attends  to  all  matters  connected  with  the  fur- 
nishing to  the  several  services  of  stationery  and  the  execution 
of  the  printing  required  by  them ;  and  the  Office  of  Works  and 
Public  Buildings,  which  in  like  manner  attends  to  the  furnish- 
ing of  the  services  with  quarters,  building  supplies,  etc.    The 
most  interesting  feature  of  these  two  services  is  that  they  are 
not  merely  the  two  great  central  supply  services  for  the  whole 
Government,  but  organs  of  control  in  respect  to  expenditures 
for  the  services  and  supplies  furnished  by  them.     The  opera- 
tions of  these  two  services  constitute  such  an  important  feature 
in  the  general  scheme  of  the  English  Government  for  con- 
trolling expenditures  that  the  commission  has  thought  it  de- 
sirable to  describe  their  organization  and  methods  of  work  in 
some  detail.     This  is  done  in  the  two  chapters  which  im- 
mediately follow  the  present  one. 

Organization  of  the  Treasury  for  the  Exercise  of  Its  Powers 
of  Financial  Control.  In  the  foregoing  we  have  seen  that  the 
Treasury  Department  of  Great  Britain  is  in  effect  a  great 
service  for  exercising  the  broadest  sort  of  control  over  all 
those  operations  of  the  Government  which  in  any  manner  affect 
the  amount  of  funds  that  Parliament  will  be  called  upon  to 
vote  for  their  support  or  the  expenditure  of  funds  when 
granted.  In  view  of  these  large  responsibilities  it  is  a  matter 
of  great  importance  to  determine  the  character  of  organiza- 
tion that  this  department  has  provided  itself  with  in  order 
that  it  may  discharge  them  properly. 

Though  termed  a  department,  the  Treasury  is  technically 
a  board.    Prior  to  1714  the  head  of  the  department  of  financial  office 
affairs  was  an  officer  known  as  Lord  High  Treasurer.     In  .of  Treasury 

in  r  act  a 

that  year  the  office  was  put  in  commission;  that  is,  while  the  Board 

171 


BRITISH  FINANCIAL  ADMINISTRATION 

office  remained  a  single  one,  provision  was  made  that  its  duties 
should  be  performed  by  a  board  consisting  of  a  First  Lord  of 
the  Treasury  and  three  junior  Lords.  Though  this  board 
has  continued  in  existence  until  the  present  time,  all  real  au- 
thority has  in  fact  passed  from  its  hands  into  those  of  an 
officer  known  as  Chancellor  of  the  Exchequer.  Thus,  as  Presi- 
dent Lowell  puts  it,1  "by  a  strange  process  of  evolution  the 
powers  of  the  Lord  High  Treasurer  have,  by  law,  become 
vested  in  a  board ;  and  by  a  still  later  custom  they  are  actually 
wielded  by  quite  a  different  officer,  whose  title  indicates  neither 
his  succession  to  the  Treasurer  nor  the  nature  of  his  present 
duties." 

The  position  of  First  Lord  of  the  Treasury  is  usually  held 
by  the  Prime  Minister,  but  whether  this  is  so  or  not  this  offi- 
cial does  not  concern  himself  with  the  actual  management  of 
the  affairs  of  the  department  of  which  he  is  nominally  the 
chief  officer.  The  three  junior  Lords  may  have  certain  minor 
duties  in  connection  with  the  Treasury,  but  their  real  duties 
consist  in  acting  as  assistants  to  the  Parliamentary  Secretary 
of  the  Treasury,  who  is  often  designated  as  the  Patronage 
Secretary,  and  who  is  the  chief  whip  of  the  Government  in  the 
House  of  Commons.  Thus  the  officers  nominally  in  charge 
of  the  Treasury  in  fact  pay  little  or  no  attention  to  the  direc- 
tion of  the  affairs  of  that  department,  but  concern  themselves 
almost  wholly  with  parliamentary  matters. 

The  real  responsible  head  of  the  Treasury  is,  as  has  been 
stated,  the  Chancellor  of  the  Exchequer.  On  the  parlia- 
mentary side  he  is  assisted  by  a  parliamentary  or  patronage 
secretary  and  by  the  three  Junior  Lords  of  the  Treasury.  On 
the  administrative  side,  the  Chancellor  of  the  Exchequer  has 
as  his  chief  assistants  two  officers  known  as  "Permanent  Secre- 
tary to  the  Treasury"  and  "Permanent  Financial  Secretary." 
Both,  as  their  names  imply,  are  permanent  officials.  Unlike 
the  Chancellor  of  the  Exchequer  and  the  Lords  of  the  Treas- 
ury, they  do  not  leave  office  when  a  change  of  ministry  takes 
1  A.  Lawrence  Lowell:  Government  of  England,  vol.  I,  p.  81. 

172 


TREASURY  CONTROL  OVER  EXPENDITURES 

place.  The  former  of  these  two  officials,  the  permanent  secre- 
tary, performs  the  duties  of  administrative  head  of  the  de- 
partment; the  latter,  the  financial  secretary,  has  immediate 
charge  of  the  duties  of  the  department  relating  to  the  exercise 
of  its  powers  of  financial  control  over  the  other  services.  It 
is  with  the  duties  of  this  official  and  the  organization  that  he 
possesses  for  their  performance  that  we  are  here  chiefly  con- 
cerned. 

To  enable  him  to  perform  his  duties  the  financial  secretary 
has  a  staff  composed  of  principal  clerks,  estimate  clerks,  and  |taff  °f 
junior  clerks.  The  several  services  to  be  controlled  are  grouped  Secretary 
into  seven  divisions  with  a  principal  clerk  in  charge  of  the 
affairs  of  each  division.  It  is  the  duty  of  each  principal  clerk 
to  familiarize  himself  with  the  organization,  work,  problems 
and  financial  needs  of  each  of  the  services  under  his  super- 
vision. All  matters  affecting  these  services  requiring  the 
attention  of  the  Treasury  pass  through  his  hands.  As  ques- 
tions of  this  character  are  constantly  arising,  these  officials 
are  thus  in  constant  touch  with  the  services  controlled  by  them. 
Sir  Robert  Chalmers,  the  permanent  secretary  of  the  Treas- 
ury, has  described  the  duties  of  these  officers  in  the  following 
way: 1 

"The  Treasury  consists  of  six  [since  increased  to 
seven]  divisions,  each  with  a  principal  clerk  at  the  head. 
Among  those  six  [seven]  divisions  is  distributed  the  work 
of  all  the  departments  of  State;  one,  for  instance,  has 
the  Army,  the  Navy  and  the  Colonial  Office;  another  one 
has  the  Legal  Departments  and  the  Home  Office;  a  third 
has  the  Irish  Departments,  and  so  on,  until  you  have  dis- 
tributed them  all  in  that  way  among  the  six  [seven]  divi- 
sions. All  the  departments  of  State  have  their  work  dis- 
tributed to  a  division  of  the  Treasury,  and  every  paper 
relating  to  a  department  goes  to  the  division  which  has 
to  deal  with  that  Department  of  the  State.  Those  prin- 

1  Report  of  the  Select  Committee  on  Estimates  (1912),  p.  n. 

173 


BRITISH  FINANCIAL  ADMINISTRATION 

cipal  clerks  at  the  head  of  the  six  [seven]  divisions  are 
the  people  who  consider  the  general  question  of  expendi- 
ture, economy,  and  efficiency  in  the  departments  of  State 
which  relate  to  their  division.  Those  are  the  real  peo- 
ple, and  they  are  bringing  forward  such  matters  through- 
out the  year.  .  .  .  All  through  the  year  one  of  the  six 
[seven]  divisions  of  the  Treasury  is  considering,  to  the 
full  of  its  time  and  power,  all  the  topics  belonging  to  the 
departments  which  fall  to  that  division." 

The  estimate  clerks  are  next  in  rank,  and  constitute  the  chief 
assistants  of  the  principal  clerks.  Their  duties  as  described 
by  Sir  Robert  Chalmers,  in  his  testimony  just  alluded  to,  are 
as  follows : 1 

"The  Estimate  Clerk  is  not  an  officer  of  the  highest 
grade  with  us — he  is  an  officer  of  the  middle  grade.  His 
function  is  to  bring  together  the  facts,  to  bring  them  out 
and  to  bring  them  before  higher  officers,  ending  with  the 
Financial  Secretary  to  the  Treasury.  It  is  an  important 
office,  but  it  is  not  of  the  highest  rank.  He  brings  in 
higher  officers  on  the  passage  of  the  Estimate  to  the 
financial  secretary,  so  far  as  there  is  anything  very  sig- 
nificant in  it;  but  he  is  the  man  who  has  immediately  to 
deal  with  these  things  and  to  draw  attention  to  anything 
that  requires  attention  as  being  large  in  amount  or  irreg- 
ular in  its  nature." 

Under  the  estimate  clerks  are  the  junior  clerks  and  the  gen- 
eral clerical  and  office  assistants  required  for  the  conduct  of 
any  administrative  office. 

Treasury  Use  of  Departmental  and  Interdepartmental  Com- 
mittees of  Investigation.  It  is  manifest  that  the  efficiency 
with  which  the  Treasury  can  discharge  its  important  duty  of 
supervision  and  control  over  the  financial  affairs  of  the  several 

1  Report  of  Committee  on  Estimates  (1912),  p.  4. 

174 


TREASURY  CONTROL  OVER  EXPENDITURES 

services  is  dependent  upon  the  extent  to  which  it  is  in  posses-  Reliance 
.....  .  ...  .  on  the 

sion  of  detailed  information  regarding  the  organization,  opera-  Esprit  de 

tions,  and  needs  of  such  services.  It  does  not  appear  that  the  CorPs 
Treasury  has  put  in  force  any  scheme  of  reporting  by  which  it 
will  receive  exact  information  regarding  the  operations  of  the 
services  controlled.  In  response  to  inquiries  by  the  commis- 
sion, treasury  officials  stated  that  this  was  not  necessary  be- 
cause the  several  principal  clerks  were  in  day-to-day  touch  with 
all  that  was  going  on  in  the  services  assigned  to  their  divisions. 
These  clerks  had  worked  up  to  their  position  from  subordinate 
posts.  For  years  their  duties  had  thus  involved  continuous 
consideration  of  the  conditions  prevailing  in  the  services  under 
their  control.  In  many  cases  they  had  conducted  careful  inves- 
tigations into  conditions  before  recommending  that  treasury 
sanction  be  given  to  a  proposed  change. 

In  addition  to  the  foregoing  means  of  securing  information 
growing  out  of  the  regular  performance  of  their  duties,  the 
principal  clerks  and  the  Treasury  as  a  whole  have  an  exceed- 
ingly effective  means  of  securing  information  through  the  use 
of  what  are  known  as  departmental  or  interdepartmental  com- 
mittees. These  are  committees  which  are  appointed  to  inquire 
into  some  special  feature  of  the  organization  or  work  of  a 
department  or  departments,  or  into  the  organization,  work, 
and  needs  generally  of  a  department  or  departments.  If  only 
one  department  is  inquired  into  the  committee  is  denominated 
a  departmental  committee.  If  two  or  more  departments  are 
involved  the  committee  is  termed  an  interdepartmental  com- 
mittee. 

These  committees  are  primarily  committees  created  by  the 
departments  themselves  for  the  purpose  of  investigating  their  Self-lnves- 
own  affairs.     They  are  usually  brought  into  existence  when  ofpartments 
some  important  change  in  organization  or  work  is  contem- 
plated, the  head  of  the  department  desiring  that  the  proposals 
shall  be  fully  investigated  and  reported  upon  before  he  com- 
mits himself  to  their  advocacy.    The  significant  feature  of  this 
method  of  investigation,  from  the  standpoint  of  treasury  con- 

175 


BRITISH  FINANCIAL  ADMINISTRATION 

trol,  is  that  on  all  or  practically  all  such  committees  the  Treas- 
ury is  represented  by  one  or  more  members.  This  representa- 
tion on  the  part  of  the  Treasury  is  welcomed  by  the  depart- 
ments concerned,  since  the  change  under  consideration  cannot 
be  made  until  the  approval  of  the  Treasury  has  been  obtained, 
and  the  latter  will  not  be  given  until  full  information  has  been 
given  regarding  the  desirability  of  the  change. 

The  Treasury,  however,  does  not  necessarily  wait  to  receive 
an  invitation  to  participate  in  a  committee  investigation.  If 
for  any  reason  it  is  not  thoroughly  satisfied  with  conditions  in 
a  particular  service  or  group  of  services,  it  itself  raises  the 
question  of  the  appointment  of  a  departmental  or  interdepart- 
mental committee.  Indeed  it  may  be  said  that  the  Treasury 
pursues  the  policy  of  having  the  several  services  brought  under 
investigation  in  this  way  at  reasonably  frequent  intervals  of 
time.  Thus  Sir  Robert  Chalmers,  the  Permanent  Secretary  of 
the  Treasury,  when  asked  the  question,1  "Assuming  that  a 
Civil  Service  Department,  we  will  say,  asks  for  no  increase — 
Independent  that  it  is  a  small  Department,  and  that  everybody  is  very  happy 

Inquiries  .  .       .  ,  J         .  fj 

by  Treasury  and  comfortable  in  it;  and,  in  fact,  that  there  is  a  small  de- 
crease each  year,  and  it  looks  quite  pretty  on  paper,  is  it  any- 
body's duty  to  see  that  the  Department  is  efficient,  and  to  see 
that  it  has  not  twice  the  staff  that  it  ought  to  have,  for  in- 
stance?" made  the  following  reply: 

"Yes.  In  practice  the  principal  clerk  at  the  head  of  one  of 
the  six  [seven]  divisions  of  the  Treasury  would  be  observing 
that  Department,  and  would  raise  the  question,  not  necessarily 
at  the  Estimates  time,  but  at  some  other  time  he  would  say :  'I 
think  we  ought  to  have  an  inquiry  into  this' ;  and  I  should  prob- 
ably write  privately  to  the  head  of  the  Department  and  say: 
'It  is  some  time  since  there  was  an  inquiry;  do  not  you  think 
we  had  better  have  an  inquiry  by  agreement  at  once?'  We 
should  take  that  as  a  part  of  our  functions  at  the  Treasury,  so 
far  as  we  can,  to  be  aware  of  the  changing  circumstances  from 
time  to  time,  and  we  should  try  to  get  the  Department  in  its 
1  Report  of  the  Select  Committee  on  Estimates,  1912,  p.  7. 

176 


TREASURY  CONTROL  OVER  EXPENDITURES 

organisation  to  conform  to  the  position  for  the  time  being." 
These  committees  also  often  come  into  existence  when  there 
is  a  difference  of  opinion  between  a  department  and  the  Treas- 
ury regarding  the  granting  of  an  authorization  that  has  been 
requested.  If  the  department  insists  upon  urging  its  request 
the  Treasury  will  say :  "We  do  not  feel  justified  in  approving 
the  request  until  we  have  investigated  the  matter  more  thor- 
oughly," and  a  proposal  is  then  made  that  the  matter  be  in- 
quired into  by  a  departmental  or  interdepartmental  committee 
on  which  the  Treasury  is  represented. 

On  the  other  hand  the  proposal  for  the  appointment  of  such   Inquiries  on 

.    ,  ,  ...  Request  of 

a  committee  not  infrequently  comes  from  the  head  of  the  de-  Department 
partment  interested,  either  because  he  believes  that  if  the 
Treasury  is  more  fully  informed  regarding  the  needs  of  his 
service  it  will  be  more  liberal  in  meeting  demands  for  changes, 
or  because  he  desires  in  this  way  himself  to  secure  a  better 
knowledge  of  and  control  over  some  subordinate  branch  of  his 
service.  In  such  cases  he  suggests  privately  to  the  Treasury 
that  it  propose  an  investigation.  "Departments  frequently  ask 
for  an  inquiry  rather  than  the  Treasury  calling  upon  them  to 
have  one.  Heads  of  Departments  find  it  a  convenient  thing 
for  managing  their  more  important  satraps  to  have  an  inquiry 
at  times."  1 

This  point  of  the  extent  to  which  the  Treasury  acts  as  a  Ensures 
means  for  securing  efficiency  and  economy  in  matters  of  cur-    and00' 
rent  administration,  and  not  merely  as  a  body  to  pass  upon  Efficien<7 
applications  for  new  expenditure,  is  one  to  which  the  commis- 
sion gave  very  careful  attention.     In  general  it  is  inclined  to 
believe   that  this  attempt  to  secure  efficiency  and  economy 
through  outside  control  is  carried  about  as  far  as  is  prac- 
ticable.   To  carry  it  much  further  would  introduce  the  danger 
that  responsibility  on  the  part  of  those  actually  entrusted  with 
the  conduct  of  Government  operations  would  be  unduly  weak- 
ened.   Sir  Robert  Chalmers,  whose  testimony  has  been  repeat- 

1  Testimony  of  Sir  Robert  Chalmers.    Select  Committee  on  Esti- 
mates, 1912,  p.  4. 

177 


BRITISH  FINANCIAL  ADMINISTRATION 


A  Central 
Business 
Agency 
of  the 
Government 


edly  quoted,  put  the  matter  in  this  way.1  When  asked  the 
question,  "Do  you  consider  the  supervision  which  is  exer- 
cised by  those  principal  clerks  is  sufficient  for  the  purpose?" 
he  replied : 

"I  do  not  think  you  can  get  any  further  without  doing 
a  great  deal  of  evil.  I  think  it  is  a  very  wrong  principle  of 
administration  to  supervise  people  too  much  and  to  remove 
their  responsibility.  I  feel  very  strongly  on  that  point.  At 
the  same  time,  I  think  it  is  very  important  that  the  Treas- 
ury should  be  strong  enough  to  put  each  Department  on  its 
defence  very  frequently,  so  that  they  should  know  they  always 
have  to  make  good  their  case." 

The  Treasury  as  a  General  Organ  of  Administrative  Con- 
trol. The  commission  entered  upon  its  study  of  the  financial 
system  of  Great  Britain  with  a  fair  appreciation  of  the  fact 
that  to  the  Treasury  Department  was  given  large  powers  of 
control  in  respect  to  the  formation  of  the  estimates  that  were 
to  be  submitted  to  Parliament.  Only  as  it  prosecuted  its  in- 
quiries into  the  details  of  the  manner  in  which  the  Treasury 
exercised  its  powers  did  it  come  to  a  realization  that,  important 
as  is  this  power  of  the  Treasury  in  respect  to  estimates,  it  con- 
stituted but  one  feature,  one  manifestation,  as  it  were,  of  the 
far  broader  power  that  the  Treasury  has  to  supervise  and 
control,  not  only  all  matters  relating  to  the  financial  opera- 
tions of  the  Government,  but  practically  all  matters  of  acquir- 
ing funds  and  property  and  all  matters  of  incurring  obligations 
— which  may  be  called  the  business  functions  as  distinguished 
from  the  public  service  activities  of  the  Government.  More 
and  more,  as  its  investigation  proceeded,  the  commission  had 
borne  in  upon  it  the  fact  that  in  the  Treasury  the  British  Gov- 
ernment had  a  great  organ  of  general  administrative  control ; 
that  upon  it  fell  the  duty  and  responsibility  for  the  final  deter- 
mination of  what  form  of  organization  the  several  departments 
of  the  Government  should  have,  what  personnel  was  needed, 

1  Report  of  Committee  on  Estimates  (1912),  p.  n. 

I78 


TREASURY  CONTROL  OVER  EXPENDITURES 

what  compensation  should  be  paid,  what  new  undertakings 
should  be  authorized,  what  changes  should  be  made  in  the 
employment  of  funds  as  provisionally  allotted  by  Parliament, 
what  new  grants  Parliament  should  be  asked  to  make,  what  the 
works  program  of  the  Government  should  be,  etc. ;  that  in 
discharging  this  function  it  was  its  duty  to  keep  itself  thor- 
oughly informed  regarding  the  conditions  and  needs  of  the 
several  services  and  use  its  utmost  endeavor  to  see  that  the 
Government  operations  were  conducted  with  the  maximum  of 
efficiency  and  economy ;  that,  in  a  word,  the  Treasury  was  the 
one  authority  to  which  Parliament  and  the  public  looked  to 
see  that  public  affairs  were  administered  in  an  economical  and 
efficient  manner. 

The  investigation  also  brought  out  another  fact  which  the 
commission  is  sure  has  never  been  adequately  appreciated  by  Continuous 

...  .      ,        Supervision 

foreign  students,  namely,  that  these  broad  powers  of  the 
Treasury,  instead  of  being  exerted  once  a  year  when  the  esti- 
mates are  brought  under  consideration,  are  exerted  from  day 
to  day  throughout  the  year. 

Still  more  important,  the  fact  was  developed  that  not  only 
had  the  Treasury  this  important  duty  of  acting  as  a  general 
organ  of  administrative  control  but  this  duty  constituted  prac-  Detached 
tically  its  exclusive  function.    It  is  difficult  to  overestimate  the  trolling  the 
importance  of  this  fact.    Until  it  is  appreciated  one  totally  mis-  ^^a  of 
conceives  the  place  of  the  Treasury  in  the  British  administra-  Business 
tive  system.     Misled  by  the  name,  the  commission  began  its 
inquiries  under  the  impression  that  the  British  Treasury  corre- 
sponded to  the  Treasury  Department  of  the  United   States 
Government,  that  to  it  was  entrusted,  as  its  primary  duty,  the 
management  of  the  national  finances,  the  collection,  custody, 
and  disbursement  of  the  public  revenues,  and  that  its  powers  in 
respect  to  the  framing  of  estimates  were,  so  to  speak,  incidental 
to  this  duty. 

Nothing  is  further  from  the  fact.  It  cannot  be  stated  too 
emphatically  that  the  British  Treasury  is,  properly  speaking, 
not  a  public  service  department  at  all.  It  has  no  public  service 

179 


BRITISH  FINANCIAL  ADMINISTRATION 

duties  of  its  own.  Its  functions  are  entirely  auxiliary  and  con- 
Not  a  trolling — restricted  to  looking  after  the  financial  and  physical 
Service  De-  measures,  and  to  the  supervision  and  control  of  the  activities 
partment  of  other  departments.  It  thus  stands  in  a  class  by  itself  as  a 
service  superior  to,  and  in  no  sense  coordinate  with,  the  depart- 
ments which  render  services  direct  to  the  public,  properly 
speaking.  In  fact,  it  does  not  deal  with  the  public ;  it  does  not 
collect  the  public  revenues — this  is  done  by  the  so-called 
"revenue"  departments;  it  does  not  have  the  custody  of  the 
public  funds — it  has  to  secure  "credits"  before  it  has  any  con- 
trol over  such  funds;  it  does  not  audit  public  expenditures — 
that  is  done  by  the  Comptroller  and  Auditor  General ;  it  does 
not  administer  the  public  debt — that  is  performed  by  a  separate 
organ,  the  National  Debt  Commissioners.  It  is  true  that  these 
several  services  are  often  spoken  of  and  in  a  way  treated  as 
subordinate  services  of  the  Treasury,  but  their  subordination  is 
practically  the  same  as  that  of  departments  which  perform 
public  services.1 

It  is  hardly  necessary  to  point  out  how  fundamental  it  is  that 
this  principle  of  organization  should  be  understood  by  anyone 
who  may  advocate  the  principle  of  treasury  control  over  esti- 
mates and  expenditures  for  our  own  political  system.  It  has 
always  been  a  matter  of  difficulty  for  American  students  to 
understand  how  it  was  that  in  England  one  department  would 

1  The  fundamental  distinction  between  the  Treasury  and  the 
public  service  departments  proper  on  the  one  hand,  and  the 
fiscal  agencies  on  the  other,  is  evidenced  by  the  line  that  is  con- 
stantly drawn  between  the  Treasury  on  the  one  hand  and  the  so- 
called  "Spending  Departments"  and  "Revenue  Department"  on  the 
other.  To  the  statement  that  the  Treasury  is  not  a  public  service 
department  or  spending  department  one  serious  exception  must  be 
made.  For  reasons  which  are  not  clear  to  the  commission  the 
national  social  insurance  systems  have  been  placed  under  the  direct 
administration  of  the  Treasury.  As  the  result  of  this  policy,  which 
is  wholly  due  to  the  action  of  the  present  Chancellor  of  the  Exchequer, 
the  Honorable  Lloyd-George,  the  Treasury  is  now  responsible  for 
the  expenditure  of  a  huge  and  growing  sum  of  money.  This  con- 
stitutes a  serious  break  in  the  theory  upon  which  the  organization 
and  functions  of  the  Treasury  rest.  This  departure  has  not  escaped 
notice  and  criticism.  It  is  very  pertinently  pointed  out  that  whereas 

1 80 


TREASURY  CONTROL  OVER  EXPENDITURES 
submit  to  the  exercise  of  a  control  over  it  by  another  depart-  An 

.  .  ™  T-,.  ,  ,        American 

ment.  Any  suggestion  that  our  own  I  reasury  Department  be  p0int  Of 
given  powers  analogous  to  those  possessed  by  the  British  view 
Treasury  has  always  been  met  by  assertions  like  these:  That 
never  would  the  other  departments  submit  to  any  such  super- 
vision or  control;  that  if  the  attempt  were  made  it  would 
break  down  in  practice ;  that  either  the  control  would  be  of  a 
merely  nominal,  and  thus  inefficient,  character,  or  that  con- 
stant friction  would  prevail.  This  view  is  so  different  from 
the  experience  of  the  average  business  man  that  we  may  won- 
der if  there  is,  after  all,  something  so  essentially  different 
about  public  business  as  to  make  the  usual  standards  for  judg- 
ment of  no  avail.  When,  however,  it  is  found  that  in  a  great 
government  the  principles  employed  are  those  with  which  men 
of  large  business  experience  are  familiar,  a  new  hope  may  be 
entertained  that  citizens  will  in  time  insist  that  public  business 
be  efficiently  managed  and  that  the  Government  to  that  end  be 
provided  with  adequate  machinery  for  central  administrative 
control. 

Once  we  grasp  the  fundamental  status  of  the  British  Treas- 
ury and  the  principle  upon  which  its  powers  rest,  all  difficulty 
in  the  way  of  understanding  why  the  British  system  works  so 
smoothly  disappears.  The  important  fact  that  the  United 
States  has  to  learn  from  this  is  that  if  it  has  any  desire  or 

the  Treasury  formerly  had  the  duty  of  questioning  proposals  for 
the  expenditure  of  money  brought  forward  by  others,  it  is  now 
itself  an  applicant  for  funds  on  a  large  scale.  It  is  thus  in  the 
anomalous  position  where  it  is  its  duty  to  question  its  own  proposals 
or  to  let  those  proposals  go  without  question.  It  is  not  merely 
that  this  is  a  seeming  violation  of  the  essential  principles  upon 
which  the  whole  British  system  of  control  of  estimates  and  ex- 
penditure rests,  but  it  raises  question  as  to  whether  it  does  not 
necessarily  weaken  the  powers  of  the  Treasury  to  control  other 
departments.  Manifestly  the  Treasury's  powers  to  resist  demands 
for  funds  brought  forward  by  other  departments  is  weakened  by 
the  fact  that  it  is  itself  in  the  field  for  increased  grants.  This 
seeming  mistake  of  policy  is,  however,  one  that  can  easily  be  cor- 
rected, and  one  may  confidently  expect  the  creation  before  long  of  a 
special  department  for  the  administration  of  the  social  insurance  work 
of  the  Government. 

181 


Failure  of 
Congress  to 
Recognize 
an  Under- 
lying 
Principle 


intention  to  build  up  in  the  Government  a  system  of  financial 
control  analogous  to  that  possessed  by  England  it  must  be 
prepared  radically  to  reorganize  its  Treasury  Department  as  it 
now  exists  or  to  bring  into  existence  an  entirely  new  organ  to 
perform  this  function.  The  Treasury  Department  of  the 
United  States  as  now  organized  is  largely  an  administrative 
department. 

It  not  only  has  entire  charge  of  the  collection,  custody,  and 
issue  of  public  moneys  and  the  management  of  the  public 
finances  generally ;  but  it  includes  within  its  scope  the  audit  of 
accounts — a  duty  which  manifestly  should  be  performed  by  an 
independent  central  agency.  It  also  operates  such  public 
activities  as  the  Revenue  Cutter  and  Life  Saving  Services, 
recently  united  in  a  general  Coast  Guard  Service.  The  con- 
struction and  operation  of  public  buildings  through  the  office 
of  the  Supervising  Architect  of  the  Treasury  may  be  recon- 
ciled with  central  control,  but  not  the  public  services.  Until 
Congress  is  prepared  both  to  accept  the  principle  involved  in 
having  the  financial  affairs  of  the  administrative  services  sub- 
jected to  a  superior  supervision  and  control,  and  to  provide  for 
the  creation  of  a  proper  organ  through  which  this  power  shall 
be  exercised,  it  will  not  be  possible  for  the  United  States  to 
have  incorporated  in  its  system  of  government  that  feature 
of  the  British  Government  which  more  than  anything  else  is 
responsible  for  the  efficiency  and  economy  with  which  the 
details  of  Governmental  operations  are  conducted. 


CHAPTER    IX 
OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS 

Distinction  between  Public  Works  Proper  and  Government  Works; 
Government  Works :  Military  and  Naval  Establishments ;  Govern- 
ment Works :  Civil  Services  ;  Office  of  Works  and  Public  Buildings ; 
The  Estimating  and  Voting  of  Funds  for  Public  Buildings;  Com- 
mitments; Distinction  between  Cost  of  Construction,  Maintenance 
and  Repairs,  Operation,  etc.;  Office  of  Works  and  Public  Buildings 
Submits  Estimates  for  all  Public  Works  Proper;  Transfer  of  Funds 
from  One  Item  to  Another  in  the  Works  Program;  Construction 
of  Public  Buildings;  Renting  of  Buildings;  Maintenance  and  Repair 
of  Buildings;  Supply  Work  of  the  Office  of  Works  and  Public 
Buildings;  Powers  of  Office  of  Works  and  Public  Buildings  to 
Control  Expenditures. 

There  are  few  features,  in  the  system  followed  by  a  country 
in  the  voting  and  expending  of  public  moneys,  that  are  of 
greater  interest  than  the  policy  and  methods  pursued  in  deter- 
mining what  public  works  shall  be  undertaken  and  the  manner 
of  their  presentation.  To  the  United  States  this  is  a  matter  of 
special  importance  on  account  of  the  magnitude  of  the  scale 
on  which  public  works  are  constructed  and  the  confessedly 
defective  system  that  is  employed  for  the  authorization  and 
construction  of  such  works.  Due  to  this  special  interest  in  the 
subject  the  commission  took  especial  pains  to  inform  itself 
concerning  how  this  subject  was  handled  by  the  Government 
of  England. 

Distinction  between  Public  Works  Proper  and  Works  of  the 
Government.  In  considering  this  matter  it  is  necessary  at  the 
outset  to  distinguish  clearly  between  what  may  be  called  public 
works  proper — that  is,  works  intended  for  the  use  and  benefit 
of  the  public  generally,  such  as  roads,  river  and  harbor  im- 
provements, canals  and  the  like — and  works  of  the  Govern- 

183 


BRITISH  FINANCIAL  ADMINISTRATION 


Radically 
Different 
Questions 
Involved 


Distinction 
to  Be  Made 
between 
Civil  and 
Military 


Lack  of 
Parliamen- 
tary Inter- 
ference 


ment,  or  those  intended  for  the  use  of  the  Government  itself, 
of  which  the  most  important  are  buildings.  It  is  evident  not 
only  that  these  two  classes  of  work  are  radically  different  in 
purpose  and  character,  but  that  quite  different  policies  and  pro- 
cedures should  be  followed  in  their  authorization,  financing, 
and,  possibly,  in  their  construction.  In  the  United  States  this 
distinction  is  of  especial  importance  on  account  of  the  extent 
to  which  the  Federal  Government  has  entered  the  field  of  public 
works  proper.  In  England  comparatively  little  is  done  in  this 
way.  So  little  does  it  do,  in  fact,  that  this  class  of  public  works 
may  be  almost  ignored.  It  will  be  understood,  therefore,  that 
the  description  that  follows  has  to  do  wholly  with  the  manner 
in  which  Great  Britain  makes  provision  for  the  construction 
and  operation  of  works  required  by  the  Government  itself  for 
the  proper  conduct  of  its  work. 

Works  of  the  Government:  Military  and  Naval  Establish- 
ments. Restricting  ourselves  to  works  of  this  character,  a 
second  distinction  should  be  made  between  works  intended  for 
the  two  military  branches,  the  Army  and  the  Navy,  and  those 
for  the  civil  services.  Following  what  is  probably  an  almost 
universal  practice,  the  planning  and  execution  of  works  for 
the  two  military  services  are,  in  Great  Britain,  entrusted  to 
these  two  services  themselves,  each  maintaining  for  this  pur- 
pose what  is,  in  effect,  a  construction  department.  These 
works  are  not  only  of  a  very  special  and  technical  character, 
but  also  their  undertaking  and  location  are  determined  almost 
wholly  by  military  exigencies.  To  an  unusual  degree,  there- 
fore, discretion  in  respect  to  the  undertaking,  the  location  and 
the  character  of  these  works  should  be  left  to  the  services 
which  alone  are  able  to  determine  these  requirements.  This, 
in  fact,  is  the  policy  pursued  by  Great  Britain.  Not  only  does 
the  initiative  rest  wholly  with  these  services,  but,  after  a  deci- 
sion has  once  been  reached  by  the  Cabinet  as. regards  the  pro- 
gram as  a  whole,  no  modification  of  any  importance  is  made 
in  it  by  Parliament.  Only  in  slight  degree,  if  at  all,  do  we 

184 


OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS 

find  Parliament  attempting  to  do  what  the  Congress  of  the 
United  States  habitually  does,  determine  where  naval  stations, 
army  posts,  etc.,  shall  be  located,  the  character  of  the  structures 
that  shall  then  be  erected,  and  even  the  nature  of  the  offensive 
and  defensive  works  that  shall  be  installed. 

In  Great  Britain,  consequently,  we  have  no  such  manifest 
evils  as  the  location  and  character  of  military  and  naval  posts 
being  determined  in  large  part  by  purely  political  considera- 
tions, and  of  useless  posts  being  maintained  at  great  cost  to  the 
public  treasury  and  loss  to  the  military  and  naval  efficiency 
simply  in  response  to  the  desires  of  particular  Senators  or 
Representatives  that  works  of  this  character  may  be  located  in 
their  districts.  In  England  army  and  navy  posts  are  con-  Absence  of 
structed  solely  with  reference  to  the  needs  of  the  services  as  Legislation 
determined  by  those  services.  It  would  involve  us  in  too  great 
detail  to  attempt  a  description  of  the  particular  organization 
and  methods  employed  by  the  war  and  navy  departments 
in  attending  to  this  branch  of  their  duties.  We  will  therefore 
content  ourselves  with  pointing  out  this  fundamental  feature 
of  the  system  and  devote  the  remainder  of  our  attention  to 
the  system  followed  in  planning,  authorizing  and  constructing 
government  works  for  the  civil  services. 

Works  of  the  Government:  Civil  Services.  Following  the 
policy  that  has  been  adopted  throughout  this  report,  of  at- 
tempting to  analyze  each  question  taken  up  for  consideration, 
in  order  that  its  full  purport  may  be  seen,  a  study  of  the 
problem  of  providing  the  civil  services  with  the  physical  plants 
needed  by  them  shows  that  involved  in  it  are  four  important 
factors :  ( i )  The  question  as  to  by  whom  and  how  a  decision 
shall  be  reached  regarding  what  works  are  needed;  (2)  the 
authority  or  organization  by  which  the  construction  work  shall 
be  performed;  (3)  the  authority  by  which  the  subsequent 
work  of  maintenance  and  repairs  shall  be  performed;  and  Elements  of 
(4)  the  manner  in  which  these  works,  representing  as  they  do 
capital  expenditure,  shall  be  financed. 

185 


BRITISH  FINANCIAL  ADMINISTRATION 

In  meeting  the  first  three  of  these  points  two  alternative 
policies  may  be  pursued,  that  of  distributing  and  that  of  con- 
centrating responsibility  and  authority.  Under  the  first  of 
these  policies  each  service  determines  for  itself  what  the  needs 
are  and  attends  to  their  satisfaction.  Under  the  second,  provi- 
sion is  made  for  a  general  public  works  department  which 
has  the  function  of  acting  for  all  of  the  civil  service  depart- 
ments. It  is,  of  course,  not  essential  that  either  of  these  poli- 
cies should  be  rigidly  adhered  to.  Thus,  for  example,  there 
may  be  a  concentration  of  authority  in  respect  to  construction 
work  and  a  diffusion  of  authority  in  respect  to  maintenance 
and  repair.  Under  either  system,  of  course,  the  individual 
services  will  take  the  initiative,  for  the  most  part,  in  making 
known  what  are  their  needs  and  desires. 

The  foregoing  analysis  has  been  made  in  order  to  bring  out 
the  significance  of  the  policy  that  has  been  actually  adopted 
by  Great  Britain.  This  policy  is  that  of  carrying  the  prin- 
ciple of  concentration,  both  in  respect  of 'the  final  decision  as 
to  what  works  shall  be  undertaken  and  in  respect  of  the  subse- 
quent work  .of  construction,  maintenance  and  repairs,  to  the 
furthest  point  practicable. 

Office  of  Works  and  Public  Buildings.  This  policy  of  con- 
centration has  been  accomplished  through  the  establishment 
of  a  public  service  known  as  the  "Office  of  Works  and  Public 
Buildings,"  to  which  is  entrusted,  as  far  as  is  practicable,  final 
authority  in  respect  of  the  provision  of  all  the  civil  services  of 
the  government  with  the  buildings,  grounds,  and  other  works 
required  by  them  for  the  proper  discharge  of  their  duties. 
The  extent  of  this  authority  may  be  seen  from  the  fact  that 
it  covers  not  only  planning  and  construction  of  buildings 
and  their  maintenance  and  repair,  but  also  the  decision  as  to 
whether  provision  for  a  service  shall  be  made  through  the  pur- 
chase or  erection  of  a  building  or  through  the  renting  of  a 
privately  owned  building.  To  this  service  is  also  entrusted 
the  work  of  equipping  public  buildings  with  the  necessary 

186 


OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS 

office  fixtures  and  of  supplying  them  with  the  articles  required 
for  their  current  operation  and  upkeep.  More  specifically  the 
duties  of  this  office  embrace : 

1 i )  The  making  of  estimates,  the  preparation  of  plans  and 
the   construction   of   public  buildings   for  the   civil   services 
of  the  Government.     This  relates  not  only  to  buildings  in 
London  but  in  all  parts  of  the  United  Kingdom  and  even  in 
foreign  countries  where,  as  in  the  case  of  the  diplomatic  and 
consular  services,  buildings  have  to  be  provided.     Included  in 
the  construction  work  under  its  charge  are  also  certain  mis- 
cellaneous  works  such  as  the  erection  of  stands  for  public  cere- 
monies, the  execution  of  works  for  the  Sovereign,  the  Imperial 
College  of  Science  and  Technology,  the  London  University 
and  other  institutions  at  South  Kensington. 

(2)  The  alteration,  maintenance  and  repair  of  not  only  all 
the  above  described  buildings  but  also  all  buildings  used  by 
the  civil  departments  and  all  royal  palaces.     Included  in  this 
part  of  its  work  is  the  duty  of  maintaining,  and  in  large  part 
operating  and  controlling  the  use  of,  royal  parks,  pleasure 
gardens,    ancient   monuments   and    such   institutions   as   the 
Osborne  Convalescent  Home  for  naval  and  military  officers, 
the  state  departments  at  Osborne,  the  Brompton  Cemetery,  the 
British  Museum  property,  etc. 

(3)  The  renting  of  buildings  for  the  civil  departments, 
both  in  and  outside  London,  where  it  is  deemed  better  policy 
for  the  Government  to  make  use  of  privately  owned  structures. 

(4)  The  provision  of  all  buildings  used  by  the  civil  serv- 
ices, whether  owned  or  rented,  with  the  permanent  equipment 
needed  by  them  in  the  way  of  fixtures,  carpets,  furniture,  etc. 

(5)  The  supply  to  such  services  of  the  articles  required  by 
them  for  the  proper  operation  of  such  buildings,  such  as  fuel, 
toilet  supplies,  brooms,  towels,  etc. 

The  Estimating  and  Voting  of  Funds  for  Public  Buildings. 
A  crucial  point  in  the  public  works  policy  of  a  country  is  the 
manner  in  which  the  needs  of  the  several  services  of  the  Gov- 

187 


BRITISH  FINANCIAL  ADMINISTRATION 


System  in 
Washington 


Contrast  of 

English 

System 


ernment  are  determined  and  brought  to  the  attention  of  the 
money-granting  authority.  In  the  United  States,  as  is  well 
known,  the  erection  of  public  buildings  is,  in  great  part,  under- 
taken at  the  instance  of  localities  desiring  to  have  public  money 
spent  and  public  improvements  made  in  their  districts.  The 
desire  is  made  known  through  the  members  of  Congress  repre- 
senting the  several  districts,  the  means  employed  being  the 
introduction  of  bills  in  Congress  providing  for  the  making  of 
such  improvements;  on  the  basis  of  these  several  bills  a  gen- 
eral building  bill  is  prepared  and  put  through  by  the  employ- 
ment of  the  well-known  log-rolling  procedure.  To  a  large 
extent  no  regard  is  paid  to  the  real  needs  of  the  public  service. 
In  many  cases  not  only  are  the  buildings  authorized  not  asked 
for  by  the  services  for  whose  use  they  are  intended,  but  they 
are  frequently  voted  against  the  strenuous  opposition  of  such 
services.  The  result  is  a  misapplication  and  a  waste  of  public 
funds  that  constitute  one  of  the  scandals  of  American  adminis- 
tration. 

Under  the  British  system  no  such  wasteful  expenditure  of 
public  funds  is  possible.  No  building  is  authorized  except  upon 
the  demand  of  the  service  interested.  This  demand,  more- 
over, is  not  presented  directly  to  Parliament,  but  to  the  Office 
of  Works  and  Public  Buildings,  and  it  remains  for  that  office 
to  determine  whether  any  further  action  shall  be  taken  upon 
it.  It  is  to  this  office,  therefore,  that  Parliament  looks  for 
direction  with  respect  to  the  need  for  public  buildings  and  the 
character  and  cost  of  the  structures  that  are  required.  The 
final  determination  whether  a  request  for  a  building  shall  even 
be  made  rests  with  this  service.  If  a  request  is  made  it  appears 
as  a  part  of  the  estimates  of  the  Office  of  Works  and  Public 
Buildings  and  not  as  a  part  of  the  estimates  of  the  service 
for  which  the  building  is  intended.  What  the  Office  of  Works 
and  Public  Buildings  in  effect  says  to  Parliament  through  its 
estimates  is:  "We  have  carefully  investigated  all  applications 
for  public  buildings  that  have  been  addressed  to  us  by  the 
several  civil  services  of  the  Government,  and  as  the  result  of 

188 


OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS 

such  investigation  we  recommend  that  the  following  provision 
be  made."  These  estimates,  of  course,  have  to  be  submitted 
to  the  Treasury  and  are  subject  to  its  superior  control  as  are 
all  other  estimates.  The  result  is,  thus,  that  each  year  Parlia- 
ment is  furnished  with  a  works  program  that  has  been  care- 
fully elaborated  by  a  technical  service  and  has  passed  the 
scrutiny  of  the  Treasury. 

Commitments.  A  special  feature  of  the  problem  of  pro- 
viding for  public  works  consists  in  the  fact  that  many  works 
require  a  number  of  years  for  their  completion.  In  adopting 
a  works  program  a  government  should  therefore  take  into 
consideration  not  only  the  question  of  new  works  to  be  author- 
ized, but  the  extent  to  which  provision  has  to  be  made  for 
works  that  have  been  authorized  in  the  past.  This  point  is 
very  carefully  covered  by  the  British  system  of  estimating  for 
public  works.  Thus  the  Estimates  submitted  to  Parliament  are 
in  a  form  that  shows  clearly  for  each  work  for  which  an 
appropriation  is  requested,  and  for  the  works  program  as  a 
whole :  ( i )  The  original  estimate  for  the  total  cost  of  the 
work;  (2)  the  revised  estimate  for  such  total  cost  if  for  any 
reason  the  original  estimate  has  undergone  revision;  (3)  the 
probable  total  expenditure  that  will  be  entailed  to  the  end  of  Based  on  a 

i  /  f  Complete 

the  current  year;  (4)  the  amount  voted  for  the  current  year;    Works 

(5)  the  further  amount  required  to  complete  the  work;  and   Pr°gram 

(6)  the  amount  asked  for  for  the  ensuing  year.     It  will  thus 
be  seen  that  Parliament  is  in  a  position  where  it  can  determine : 
( i )  The  extent  to  which  it  is  already  committed  to  expendi- 
tures for  public  works;   (2)  the  extent  to  which  these  com- 
mitments will  require  the  voting  of  money  for  the  next  year ; 
(3)  the  extent  to  which  it  is  requested  to  charge  the  Govern- 
ment with  new  commitments;  and  (4)  the  amount  of  money 
that  such  new  commitments  will  call  for  during  the  year  for 
which  provision  is  being  made. 

Distinction  between  Cost  of  Construction,  Maintenance  and 
Repair,   Operation,   etc.     The  estimates   furthermore   distin- 

189 


BRITISH  FINANCIAL  ADMINISTRATION 

guish  carefully  between  the  expenditures  for  construction  and 
those  for  subsequent  acts  in  connection  with  the  upkeep  and 
operation  of  the  buildings.  They  thus  give  the  figures  sepa- 
rately for :  ( i )  New  works,  alteration,  additions,  and  pur- 
chases; (2)  maintenance  and  repairs;  (3)  furniture;  (4)  fuel, 
light,  water,  and  household  articles;  (5)  caretakers,  etc.;  (6) 
rents,  tithes,  net  charges,  insurance,  etc.  As  regards  the  first 
three  items  the  estimates  are  given  for  individual  buildings. 
As  regards  the  remaining  items,  the  estimates  are  for  classes 
of  buildings,  the  sum  so  provided  thus  being  available  for  ex- 
penditure at  the  discretion  of  the  Office  of  Works  and  Public 
Buildings  upon  any  of  the  buildings  falling  within  a  class. 
This  itemization,  it  should  be  noted,  is  in  the  way  of  subheads 
of  appropriations.  The  votes  themselves  are  for  classes  of 
works  or  buildings  such  as  "diplomatic  and  consular  build- 
ings," "revenue  buildings,"  etc.1 

Office  of  Works  and  Public  Buildings  Submits  Estimates 
for  All  Public  Works  Proper.  In  addition  to  submitting  esti- 
mates for  the  funds  needed  by  it  in  performing  work  directly 
in  its  charge,  the  Office  of  Works  and  Public  Buildings  also 
submits  the  estimates  for  all  public  works  proper.  Thus  the 
estimates  for  the  year  ending  March  31,  1915,  included  esti- 
mates for:  (i)  Surveys  of  the  United  Kingdom;  (2)  Har- 
bors under  the  Board  of  Trade;  (3)  Peterhead  Harbor;  (4) 
Rates  on  Government  Property;  (5)  Public  Works  and  Build- 
ings, Ireland;  and  (6)  Railways,  Ireland.  Their  inclusion 
makes  it  possible  for  Parliament  to  s§e  in  one  place  the  total 
cost  of  the  works  program  of  the  Government,  and  thus  to 
distinguish  in  a  way  between  expenditures  for  capital  outlay 
and  for  current  operation. 

Transfer  of  Funds  from  One  Item  to  Another  in  the  Works 
Program.  Another  feature  of  no  little  importance  in  the 
British  public  works  system  is  the  facility  with  which  money 

1  See  List  of  Votes,  p.  76. 

190 


OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS 

allotted  for  one  work  may  be  applied  to  another.  Thus,  if  the 
Office  of  Works  and  Public  Buildings  find,  that,  owing  to  delay 
in  the  preparation  of  plans  or  the  delivery  of  materials,  or 
through  any  other  contingency,  all  the  money  appropriated  for 
one  building  will  not  be  expended  during  the  year,  and  there  is 
another  building  or  work  upon  which  a  sum  larger  than  the 
appropriation  can,  with  advantage,  be  expended,  it  can  bring 
the  matter  to-  the  attention  of  the  Treasury  and  secure  a  trans-  English 
fer.  It  is,  of  course,  to  be  understood  that  the  total  authorized  Puts  Re- 
cost  of  a  building  cannot  be  increased  in  this  way,  nor  the  sponsibihty 
total  sum  appropriated  for  public  buildings  exceeded.  This  Executive 
flexibility  in  the  expenditure  of  moneys  permits  the  Office  of 
Works  and  Public  Buildings  to  use  to  the  greatest  advantage 
the  money  voted.  Under  the  American  system  of  rigid  appro- 
priations for  particular  items  and  inability  to  make  transfers, 
the  construction  of  buildings  is  often  delayed  because  the  ap- 
propriations for  those  buildings  are  exhausted,  while  unused 
balances  stand  to  the  credit  of  other  appropriations.  Abuse  of 
the  large  powers  of  discretion  granted  to  the  Office  of  Works 
in  respect  to  the  expenditure  of  appropriations  is  guarded 
against  through  the  requirement  that  treasury  sanction  must  be 
obtained  for  all  transfers.  The  grant  by  Parliament  of  this 
power  of  making  transfers  is  but  another  illustration  of  the 
general  policy  of  Great  Britain  to  grant  large  discretionary 
powers  to  the  Executive  in  carrying  out  the  general  policies 
outlined  by  Parliament.  This  is  in  marked  contrast  with  the 
system  which  prevails  in  the  United  States,  where  the  Con- 
gress goes  as  far  as  it  possibly  can  in  the  way  of  controlling  in 
detail  how  moneys  voted  shall  be  spent. 

Construction  of  Public  Buildings.  A  few  words  should  be 
said  regarding  the  policy  of  the  Office  of  Works  in  respect  to 
the  performance  of  the  work  entrusted  to  it.  In  respect  to  the 
erection  of  new  buildings  the  practice  of  the  office  is  to  pre- 
pare  the  plans  and  supervise  the  work,  but  to  have  the  work  Supervision 
itself  done  by  private  firms  under  the  contract  system.  When 

191 


BRITISH  FINANCIAL  ADMINISTRATION 


A  Control- 
ling as  Well 
as  a 
Renting 
Agency 


Usually 
Done  by 
Contract 


the  building  to  be  erected  is  of  special  importance,  however,  as 
in  the  case  of  such  buildings  as  the  new  Law  Courts  Building, 
Westminster  Hall  Extension,  Admiralty  Extension  Building, 
new  War  Office,  and  new  Public  Offices  Building,  it  is  usual  to 
call  for  the  submission  of  plans  from  outside  architects.  In 
such  cases  the  construction  work  is  supervised  by  the  Office. 
This  is  substantially  the  system  followed  by  the  United  States. 

Renting  of  Buildings.  As  stated,  the  Office  of  Works  and 
Public  Buildings  is  the  agent  made  use  of  by  all  the  civil  serv- 
ices in  securing  quarters,  whether  through  erection,  purchase 
or  lease.  A  service  finding  itself  in  need  of  additional  quarters 
addresses  itself  to  this  Office.  The  latter,  on  its  own  responsi- 
bility, can  execute  a  lease  when  the  rental  called  for  does  not 
exceed  £100  per  annum  and  the  term  does  not  exceed  seven 
years.  If  a  greater  expenditure  or  a  longer  term  is  involved 
the  approval  of  the  Treasury  must  first  be  secured.  In  dis- 
charging this,  as  well  as  all  other  branches  of  its  duties,  the 
Office  is  not  a  mere  executing  agency.  It  is  its  duty,  before 
executing  a  lease,  to  assure  itself  that  there  is  a  real  need  for 
the  additional  quarters,  that  the  quarters  are  of  a  proper  char- 
acter and  location  and  represent  the  most  advantageous  ar- 
rangement that  can  be  made.  Its  function  is,  in  other  words, 
distinctly  one  of  control.  Responsibility  for  the  action  taken 
rests  upon  it  rather  than  upon  the  petitioning  service. 

Maintenance  and  Repair  of  Buildings.  After  buildings  are 
constructed  they,  as  well  as  all  rented  quarters,  are  maintained 
and  kept  in  repair  by  the  Office  of  Works.  In  performing 
this  branch  of  the  work,  in  almost  all  cases  use  is  made  of  the 
contract  system.  The  only  important  exception  to  this  is  in 
the  case  of  the  repair  of  blinds  of  buildings  in  London.  For 
some  reason  the  Office  came  to  the  conclusion  that  it  could  do 
this  work  more  satisfactorily  by  its  own  employees.  It  accord- 
ingly, in  1895,  organized  a  special  shop  to  do  this  work,  and 
its  small  force  is  permanently  employed  in  repairing,  fitting, 

192 


OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS 

and  removing  blinds  on  the  public  buildings  of  the  city.  For 
cities  other  than  London  contracts  are  awarded  upon  competi- 
tive bids  to  local  contractors  for  the  maintenance  and  repair 
of  individual  buildings  or*  all  the  Government  buildings  in 
a  city.  The  maintenance  and  repair  of  public  buildings  in 
London  is  provided  for  under  a  general  contract  cover- 
ing all  classes  of  work  and  running  for  a  period  of  three 
years. 

There  seems  to  have  been  some  question  as  to  whether  this 

arrangement  was  in  all  respects  satisfactory.     It  was  accord-    A  Critical 
i-         -i-  -1  -1       11  110        -i/-  Review  of 

ingly  inquired  into  with  considerable  care  by  the  Special  Com-  Methods 

mittee  on  Estimates  of  1912.  The  committee  seemed,  how- 
ever, to  be  satisfied  with  the  explanation  given  by  the  Office 
of  the  working  of  the  system.  The  Office  admitted  that  the 
system  as  it  had  formerly  existed  was  open  to  criticism,  but 
maintained  that  the  evils  earlier  existing  had  been  corrected  by 
a  change  made  in  1911.  The  revised  system  together  with 
the  changes  made  by  it  over  the  old  system  is  described  in  a 
memorandum  submitted  to  the  Committee  on  Estimates,  from 
which  the  following  is  taken : 1 

"The  present  triennial  maintenance  contract  for  Lon- 
don, held  by  Messrs.  Leslie  &  Co.,  Lt'd.,  commenced  on 
the  1st  April,  1911.  In  connection  with  this  contract  a 
new  basis  of  tendering  was  adopted,  the  essential  features 
of  which  will  be  best  brought  out  by  a  comparison  with 
the  previously  existing  basis.  In  previous  years  tenders 
for  the  London  Maintenance  Contract  had  been  invited 
on  a  priced  schedule.  This  schedule  was  prepared  by  the 
measurers  of  His  Majesty's  Office  of  Works,  and  com- 
prised all  classes  of  work  likely  to  be  executed,  and  ma- 
terials likely  to  be  required,  in  the  maintenance  of  Lon- 
don buildings,  together  with  a  price  per  unit  in  respect  of 
each  item  of  work  or  materials.  In  respect  of  labour  in 
day  work  the  tenderer  was  required  to  quote  a  percentage 

1  Report  of  the  Select  Committee  on  Estimates,  1912,  p.  141. 

193 


BRITISH  FINANCIAL  ADMINISTRATION 


Evolution 
of  the 
British 
System 


on  the  standard  rates  of  wages  which  under  the  fair 
wages  resolution  had  to  be  paid  to  the  workmen.  In 
respect  of  measured  work  and  materials,  the  tenderer  was 
asked  to  quote  one  percentage  addition  or  deduction  to 
cover  every  item  in  the  schedule. 

"It  was  thought  that  this  method  gave  an  unfair  ad- 
vantage in  tendering  to  the  existing  contractors,  as  they 
alone  knew  the  quantity  of  work  and  materials  required. 
After  prolonged  consideration  it  was  decided  that  the 
only  method  whereby  this  advantage  of  existing  contrac- 
tors could  be  overcome,  was  to  prepare  a  schedule  show- 
ing the  quantities  of  work  and  material  that  had  actually 
been  required  by  the  Board  in  one  year,  and  to  ask  the 
tenderer  himself  to  fill  in  the  prices  per  unit.  The  sched- 
ule then  became  in  reality  a  bill  of  quantities  which  en- 
abled a  comparison  of  the  tenders  to  be  easily  made.  The 
lowest  tender  was  accepted,  and  the  price  per  unit  filled 
in  by  the  tenderer  automatically  became  the  basis  of  the 
contract." 

Supply  Work  of  the  Office  of  Works  and  Public  Buildings. 
As  indicated  in  the  enumeration  of  the  duties  of  the  Office 
of  Works  and  Public  Buildings,  this  Office  is  not  only  one  for 
construction,  maintenance,  repair  and  equipment  of  public 
buildings  but  also  a  supply  department  for  the  furnishing  of 
all  articles  required  for  the  current  operation  of  these  build- 
ings. The  Office,  in  a  word,  stands  towards  all  the  civil  serv- 
ices as  a  general  supply  department  with  respect  to  quarters. 
In  a  way  it  is  the  general  landlord  and  all  the  several  services 
are  its  tenants. 

It  would  appear  that,  as  regards  its  supply  work  proper, 
the  Office  originally  did  little  more  than  act  as  a  contracting 
agency  for  the  other  departments.  Step  by  step,  however,  it 
has  passed  to  the  system  of  itself  making  purchases,  of  ware- 
housing the  articles  purchased,  and  of  issuing  them  to  the 
services  upon  their  requisition.  The  evolution  of  this  system 

194 


OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS 

is  thus  described  in  a  Memorandum  prepared  for  the  Com- 
mission by  the  Office: 

"In  1894  a  central  store  was  established  in  the  Post 
Office  Building  at  Clerkenwell  and  removed  in  1901  to 
Lambeth  Palace  Road,  for  soap,  candles  and  all  such 
household  requisites  for  the  London  Offices.  Formerly 
such  articles  were  delivered  by  the  various  contractors, 
who,  of  course,  took  into  account  the  cost  of  distribution 
in  making  their  tenders.  The  new  system  has  resulted  in 
a  substantial  saving  and  much  quicker  deliveries. 

"In  1895  the  repair,  maintenance,  fitting  and  removal 
of  blinds  for  the  buildings  in  the  Board's  charge  was 
taken  over  by  the  Board's  staff,  instead  of  being  done  by 
outside  contractors.  The  staff  supervises  a  small  body 
of  permanent  workmen.  New  blinds  are,  as  before,  sup- 
plied by  a  contractor. 

"The  system  of  supply  of  coal  to  government  depart- 
ments was  revised  in  1899-1900.  An  expert  on  coal  was 
engaged  as  an  assistant  in  the  supplies  division  and  two 
coal  stores  have  been  formed  in  London.  Contracts  are 
now  made  with  colliery  owners,  the  middleman  being 
dispensed  with.  The  arrangement  has  effected  a  very 
large  saving  and  has  proved  most  satisfactory  in  every 
respect. 

"In  1901  the  Board  took  over  the  supply  of  fuel  to 
Country  Post  Offices  and  the  Prisons.  In  1907  an  iron- 
monger store  was  established.  In  1909  an  engineering 
store  was  established  at  Elephant  Buildings,  Newington 
Butts,  S.  E." 

Powers  of  Office  of  Works  and  Public  Buildings  to  Control 
Expenditures.  Important  as  is  the  question  of  the  system 
followed  in  providing  the  government  with  public  buildings 
and  in  afterwards  attending  to  their  maintenance  and  repair, 
we  should  scarcely  have  felt  justified  in  giving  to  it  the  atten- 

195 


BRITISH  FINANCIAL  ADMINISTRATION 

tion  that  we  have,  did  the  Office  of  Works  and  Public  Build- 
ings constitute  a  mere  supply  department  to  execute  requisi- 
tions drawn  upon  it.  As  has  been  intimated,  the  functions  of 
the  office  go  beyond  this.  It  is,  in  fact,  one  of  the  great  agen- 
cies through  which  control  is  exercised  over  all  the  civil 
services  with  respect  to  their  expenditure  for  quarters.  It 
cannot  be  too  distinctly  stated  that  it  is  under  no  obligation 
Has  Broad  to  fill  requisitions  until  it  has  satisfied  itself  that  the  quarters, 
ary  Powers  equipment,  or  supplies  requisitioned  correspond  to  the  needs  of 
the  service.  That  it  has  these  powers  and  that  it  is  its  duty  to 
exercise  them  is  brought  out  by  the  following  description  of 
the  duties  of  the  Controller  and  Deputy  Controller  of  Sup- 
plies as  given  in  the  special  memorandum  furnished  to  our 
commission  by  the  Office  of  Works  and  Public  Buildings : 

"Controller  of  Supplies:  Directs  the  general  adminis- 
tration of  the  division.  Decides  all  important  questions 
as  to  supply  or  refusal  of  furniture  or  supplies  of  an 
unusual  character;  all  requisitions  for  large  or  important 
supplies  are  submitted  for  the  approval  of  the  controller. 
Deals  with  the  recommendations  in  connection  with  all 
important  contracts.  Determines  the  standard  equipment 
for  different  classes  of  officers  and  offices.  Deals  per- 
sonally with  all  important  rentings  of  property  for  official 
purposes  in  London.  Controls  the  estimates  and  expen- 
ditures of  the  division.  Exercises  general  personal  super- 
vision over  the  stores,  methods  of  purchase  and  distribu- 
tion, workshops  appointment  of  employees  and  work  gen- 
erally of  the  division.  Advises  the  Board  on  all  ques- 
tions of  policy  in  connection  with  supplies  and  contracts 
for  same  and  labour  questions  arising  on  contracts. 

"Deputy  Controller  of  Supplies:  Supervises  the  sup- 
ply of  all  furniture,  etc.,  to  public  buildings,  deciding 
whether  supplies  are  in  accordance  with  practice  or  reg- 
ulations and,  subject  to  reference  to  the  controller,  what 
requisitions  shall  be  complied  with  or  refused.  Advises 

196 


OFFICE  OF  WORKS  AND  PUBLIC  BUILDINGS 

• 

the  Board  on  all  less  important  contracts.  Regulates  the 
expenditure  of  the  division.  Reviews  all  cost  or  labour- 
saving  commodities  and  devices  submitted  to  the  depart- 
ment before  submission  to  the  controller.  Reviews  speci- 
fications, etc.,  for  store  purchases  and  conditions  of  ten- 
der. Deals  with  all  questions  affecting  the  division  in 
general  and  with  questions  in  regard  to  the  supply  of  fuel 
in  particular,  except  such  as  are  of  sufficient  importance 
to  necessitate  their  submission  to  the  controller.  Acts 
for  the  controller  in  his  absence." 


CHAPTER   X 
STATIONERY    OFFICE 

The  Estimating  and  Voting  of  Funds  for  Stationery  and  Printing; 
Allotment  of  Appropriations ;  Procedure  in  Purchase,  Warehousing, 
and  Issue  of  Supplies;  Powers  of  Stationery  Office  to  Control  Ex- 
penditures. 

In  His  Majesty's  Stationery  Office  the  British  Government 
has  a  supply  service  for  the  furnishing  of  stationery  and  the 
execution  of  printing  for  the  several  departments,  that  is 
organized  and  conducted  on  precisely  the  same  principles  as 
those  governing  the  Office  of  Works  and  Public  Buildings. 
Unlike  the  latter  office,  however,  its  activities  cover  all  the 
departments,  military  and  naval  as  well  as  civil,  and  include 
stations  wherever  situated,  outside  as  well  as  inside  London. 

This  office  came  into  existence  as  the  result  of  Burke's 
Administrative  Reform  Act  of  1782.  "Stationery  before  that 
was  supplied  by  persons  who  held  patents,  or  was  bought 
directly  by  the  Departments.  All  these  patents  gradually  fell 
in,  and  the  Departments  ceased  their  separate  purchases.  The 
provision  of  stationery  was  undertaken  by  the  Stationery 
Office,  on  whom  further  duties  were  subsequently  laid,  until 
the  office  is  now  a  great  purchasing,  contracting,  distributing, 
and  selling  Department,  having  a  turnover  of  £897,670  and 
serving  every  other  Department,  and  every  quarter  of  the 
world."  * 

The  Estimating  and  Voting  of  Funds  for  Stationery  and 
Printing.  As  in  the  case  of  the  Office  of  Works  and  Public 

1  Report  from  the  Select  Committee  on  Publications  and  Debates' 
Reports,  1911,  p.  iii.  This  committee  made  a  thorough  investiga- 
tion of  the  operations  of  the  Stationery  Office  and  published  its 
findings  in  two  reports,  1911  and  1912. 

198 


STATIONERY  OFFICE 

Buildings,  the  Stationery  Office,  and  not  the  several  depart- 
ments, is  the  authority  which  determines  what  funds  shall  be 
asked  for  and  for  which  appropriations  are  to  be  made.  Under  Submits  All 

r  .  Estimates 

the  head  of  stationery  and  printing  it  submits  in  one  place  an  for 
estimate  of  the  money  that  will  be  required  for  all  branches  of   DePartment9 
the  Government.     The  several  services  themselves  submit  no 
estimates  for  stationery  and  printing.     The  character  of  the 
estimates  is  shown  by  the  estimate  for  the  year  1914-1915  pre- 
cisely as  it  appears  in  the  book  of  estimates,  reproduced  here 
on  page  200. 

It  will  be  seen  that  though  there  is  but  a  single  vote  the 
money  has  to  be  accounted  for  under  sixteen  heads.  The 
segregation  that  is  made  has  for  its  purpose  to  distinguish 
between:  First,  appropriations  for  the  great  branches  of  the 
public  service,  viz.,  (i)  the  administrative  departments,  (2)  Only  One 
the  two  Houses  of  Parliament,  (3)  the  Stationery  Office,  and 
(4)  certain  special  purposes;  and  second,  the  main  classes  of 
supplies  to  be  furnished  to  the  administrative  departments, 
viz,,  (i)  printing,  (2)  paper,  (3)  parchment  and  vellum,  (4) 
binding,  etc.,  (5)  books  and  maps,  and  (6)  miscellaneous 
small  stores. 

As  was  pointed  out  in  our  consideration  of  the  form  and 
character  of  estimates,  each  estimate  proper,  consisting  of  the 
vote  and  the  subheads  under  which  an  accounting  of  the  money 
voted  is  to  be  had,  is  supported  by  tables  giving  for  purposes 
of  information  the  details  entering  into  each  of  the  lettered 
subheads  appearing  in  the  statement  that  we  have  reproduced.  Supporting 
Thus,  for  example,  there  is  given  for  the  subhead  "F.  Paper 
for  Public  Departments"  the  table  on  page  201. 

It  is  evidently  a  matter  of  interest  to  determine  how  expen- 
ditures for  stationery  and  printing  are  distributed  according 
to  services.  This  is  shown  in  a  special  table  which  gives  the 
actual  expenditure  for:  (i)  Printing,  (2)  paper  and  other 
supplies,  and  (3)  total  for  both  items  for  each  of  134  separate 
organization  units  during  each  of  the  years  1910-11,  1911-12 
and  1912-13.  Thus,  though  the  appropriation  for  stationery 

199 


BRITISH  FINANCIAL  ADMINISTRATION 


STATIONERY  AND  PRINTING 

I.  Estimate  of  the  Amount  required  in  the  year  ending  3ist 
March,  1915,  to  defray  the  Expense  of  providing-  Sta- 
tionery, Printing,  Paper,  Binding  and  Printed  Books, 
for  the  Public  Service;  to  pay  the  Salaries  and  Ex- 
penses of  the  Stationery  Office;  and  for  sundry  Mis- 
cellaneous Services,  including  Reports  of  Parlia- 
mentary Debates. 

One  Million  and  Sixty-nine  Thousand  Two  Hundred  and 
Seventy-Two  Pounds. 

II.     Subheads  under  which  this  Vote  will  be  accounted  for 
by  the  Stationery  Office. 


1914-5 

I9I3-4 

Increase 

Decrease 

A.  Salaries,  Wages,  and  Allowances. 

£ 
55,747 

£ 
49,983 

£ 
5,764 

£ 

B.  Horses  and  Carts,  and  Carriages 

7.  200 

Q.5OO 

2  ^OO 

C.  Police   

175 

175 

D.  Incidental  Expenses  

2,800 

^.OOO 

2OO 

E.  Printing  for  Public  Departments 

378,000 

360,000 

l8,OOO 

F.  Paper  for  Public  Departments.  . 

392,000 

423,000 

3I,OOO 

G.  Parchments  and  Vellum  for  Pub- 
lic Departments  

7.000 

6,000 

I,OOO 

H.  Binding,  etc.,    for    Public    De- 
partments   

92,000 

88,000 

4.OOO 

I.    Books  and  Maps  for  Public  De- 
partments   

49,000 

40,000 

J.    Miscellaneous  Small  Stores  for 
Public  Departments  

108,000 

105,000 

3.OOO 

K.  Printing,  Paper,    Binding,  etc., 
for  Two  Houses  of  Parliament. 

80,000 

80,000 

L.  Printing,  Paper,   Binding,   etc., 
for  Stationery  Office  Publica- 
tions   

50,000 

50,000 

M.  Printing,  Paper,    Binding,  etc., 
for  Gazettes  

5,800 

6,000 

2OO 

N.  Parliamentary     Debates     and 
Records  

9,000 

7,500 

1.  5OO 

O.  Printing,  Paper,  etc.,  for   Cus- 
toms Bills  of  Entry  

300 

•300 

P.  Parliamentary  Papers  for  Free 
Libraries  

250 

250 

GROSS  TOTAL  £ 

1.  2^7.  272 

1.237.708 

It  264. 

•i-i  700 

Deduct: 
Q.  Appropriations  in  Aid  

l68,OOO 

l6o,OOO 

8,OOO 

NET  TOTAL.  .                 .  .£ 

I.  06Q.272 

1.077.708 

33.264 

4I.7OO 

Net  decrease — £8,436 


200 


STATIONERY  OFFICE 


F.     Paper  for  Public  Departments 

The  provision  under  this  subhead  may  be  roughly  classified 
as  follows : 


1914-1915 

1913-1914 

Paper,  for  printing  only  

£  72,000 

£  QT.OOO 

Paper  for  official  correspondence  (much  of  which  is 
partly  printed)  

135,000 

14.1,000 

Envelopes  for  ditto                             

85,000 

85,000 

Note  paper  and  corresponding  Envelopes  for  Official 
use  

21,000 

21,000 

Paper  to  be  bound  into  Account  Books  

38,000 

38,000 

Telegraph  Envelopes  

5,000 

7,000 

Wrapping,  household,  and  miscellaneous  Paper  

18,000 

36,000 

Total  for  Paper  for  Public  Departments  

£^02.000 

£421,000 

and  printing  is  made  in  one  lump  sum  and  with  sixteen  sub- 
heads between  which  transfers  may  be  made,  Parliament  is 
furnished  with  detailed  data  regarding  how  the  money  is  spent 
by  individual  services. 

Allotment  of  Appropriations.  As  the  Stationery  Office  re- 
ceives one  lump  sum  for  meeting  the  demands  of  all  branches 
of  the  Government  for  printing  and  stationery,  it  is  desirable 
that  some  system  be  devised  for  apportioning  the  money  avail- 
able among  the  several  services.  Until  recently  no  attempt  was 
made  to  do  this,  the  total  allotted  under  each  subhead  being 
generally  available  for  all  services  covered  by  such  head. 
Under  this  system  there  was  no  incentive  to  economy.  Each  incentives 
service  felt  that  any  saving  on  its  part  but  swelled  the  sum  Economy 
remaining  for  the  other  services.  This  feature  of  the  work 
of  the  Stationery  Office  received  careful  consideration  at  the 
hands  of  the  select  committee  which  investigated  in  191 1  and 
1912  the  operations  of  that  office.  In  his  testimony  before 
this  committee  the  Controller  of  the  Stationery  Office  recom- 
mended strongly  that  the  total  appropriated  under  each  sub- 
head for  the  public  departments  be  allotted  to  them  on  the 
basis  of  past  expenditures,  and  that  an  allotment  so  made 

20 1 


BRITISH  FINANCIAL  ADMINISTRATION 


Recommen- 
dations of 
Committee 
Accepted 


Order  of 
Treasury 
Governing 


should  not  be  exceeded  until  the  approval  of  the  Treasury 
had  been  obtained.  Following  this  suggestion,  the  committee 
included  in  its  report  for  1911  the  following  recommenda- 
tion : * 

"Your  Committee  recommend  that  with  a  view  to 
pressing  upon  Departments  the  necessity  of  keeping 
within  a  specific  limit  the  expenditure  for  which  they  call 
upon. the  Stationery  Office,  the  sum  indicated  annually 
as  the  estimate  for  the  Department  in  the  Stationery  Of- 
fice Vote,  should  be  a  real  estimate  prepared  by  the  Sta- 
tionery Office,  inclusive  of  all  requirements,  and  not  to 
be  exceeded  without  the  permission  of  the  Treasury.  At 
present  the  savings  of  one  economical  Department  may 
go,  via  the  Stationery  Office  vote,  to  provide  the  means 
of  extravagance  for  another." 

This  recommendation  was  accepted  by  the  Treasury  in  so 
far  as  the  items  assigned  for  printing  and  publications  were 
concerned,  but  was  rejected  as  regards  stationery  items.  In 
the  Treasury  Minute  dated  February  22,  1912,  through  which 
it  put  into  effect  most  of  the  recommendations  of  the  commit- 
tee, it  stated  as  follows :  2 

"Expenditure  on  Stationery  and  Printing  is  of  such  a 
nature  that  it  is  peculiarly  difficult  for  the  Department  on 
whose  vote  the  expenditure  falls  (the  Stationery  Office) 
to  exercise  effective  control  over  the  demands  of  other 
Departments,  and  it  must  mainly  rest  with  the  Depart- 
ments themselves  to  effect  the  economies  (the  possibility 
of  which  My  Lords  do  not  question)  by  reduction  of 
demands  for  Paper,  Printing  and  other  Stationery.  .  .  . 
As  regards  the  supply  of  Paper  and  other  articles,  My 
Lords  think  economy  would  best  be  served  by  the  sug- 

1  Report  from  the  Select  Committee  on  Publications  and  Debates' 
Reports,  1911,  p.  v. 

2  Report  from  the  Select  Committee  on  Publications  and  Debates' 
Reports,  1912,  Appendix  No.  i,  p.  67. 

202 


STATIONERY  OFFICE 

gestions  approved  above  for  departmental  control  of  de- 
mands, and  for  inspection,  standardisation,  etc.,  and  that 
if  these  are  acted  upon  it  will  not  be  necessary  to  require 
Treasury  authority  for  expenditure  in  excess  of  a  neces- 
sarily somewhat  conjectural  estimate. 

"On  the  other  hand,  as  regards  cost  of  Printing,  My 
Lords  think  that  the  suggestion  of  the  Select  Committee 
should  prove  of  service  in  directing  the  attention  of  De- 
partments to  their  Printing  expenditure  in  years  in  which 
this  expenditure  is  exceptionally  heavy.  They  are  there- 
fore giving  directions  to  the  Controller  of  the  Stationery 
Office  to  prepare  an  Estimate  based  on  the  expenditure 
on  Printing  for  various  Departments  in  previous  years 
(as  shown  in  the  Stationery  Office  Estimates),  and  They 
propose  to  adopt  that  Estimate  as  the  limit  of  Printing 
expenditure  for  each  Department  for  each  financial  year, 
beyond  which  any  new  expenditure  would  require  their 
Lordships'  sanction." 

The  result  of  this  action  on  the  part  of  the  Treasury  was   Allotment 
to  establish  the  allotment  system  for  the  item  of  printing,  but  Printing  0' 
not  for  that  of  stationery.     To  control  expenditures  under 
the  latter  head,  the  Treasury  adopted  recommendations  of  the 
Committee : 

That  demands  for  Stationery  and  Printing  in  each  De- 
partment should  be  under  the  direct  charge  of  an  officer 
of  sufficient  status  and  that  he  should  work  under  the 
direct  supervision  of  an  officer  of  the  highest  rank  (i.  e., 
not  below  the  rank  of  Assistant  Secretary  or  its  equiv- 
alent) who  should  countersign  the  demands;  that  the 
Stationery  store  of  each  Department  should  be  period- 
ically inspected  by  the  Stationery  Office;  that  a  list  o£ 
ordinary  consumable  stores  be  compiled  by  the  Stationery 
Office,  and  that  supplies  of  articles  not  on  the  list  be  only 
allowed  on  cause  being  shown;  that  standardising  of  ar- 

203 


BRITISH  FINANCIAL  ADMINISTRATION 

tides  supplied  be  encouraged,  and  that  "touting"  by  out- 
side firms  be  forbidden. 

i 

Procedure  in  Purchase,  Warehousing  and  Issue  of  Supplies. 
The  Stationery  Office  kindly  prepared  for  the  commission  a 
statement  describing  the  practice  and  procedure  followed  by 
it  in  the  discharge  of  its  duties.  From  this  statement  the 
following  is  taken  as  covering  some  of  the  most  important 
aspects  of  its  work  i1 

Purchase  of  Supplies:  "Up  to  the  present  the  govern- 
ment owns  no  mills  or  printing  works,  although  a  pro- 
posal to  establish  a  state  printing  office  is  now  under  con- 
sideration. Supplies  are  therefore  obtained  under  con- 
tracts made  by  the  Controller  of  Her  Majesty's  Station- 
ery Office  with  suitable  firms.  All  important  contracts 
are  put  up  to  open  competition  and  are  widely  advertised ; 
in  the  case  of  smaller  items  required  specially,  a  limited 
tender  is  issued  to  those  firms  known  to  be  in  a  position 
to  supply  satisfactorily.  As  a  general  rule  the  lowest 
tender  is  accepted. 

Inspection:  "Everything  supplied  is  carefully  exam- 
ined at  His  Majesty's  Stationery  Office  to  see  that  it  is 
strictly  in  accordance  with  the  specification.  In  every 
branch  of  the  department  where  technical  knowledge  and 
experience  are  of  value  the  Controller  has  at  his  disposal 
a  staff  of  experts,  chosen  by  special  competitive  examina- 
tion in  the  subjects  appertaining  to  the  particular  branch. 
Also,  when  advisable,  the  accounts  rendered  by  the  vari- 
ous firms  employed  are  checked  by  officers  of  technical 
experience. 

Standardization:  "It  may  be  noted  that,  so  far  as  pos- 
sible, supplies  made  for  the  public  service  are  standard- 
ised, departments  being  informed  of  the  desirability  of 

1  In  some  cases  side  headings  have  been  inserted. 

204 


STATIONERY  OFFICE 

cooperation  in  this  respect.     It  is   found   that  by  this 
means  more  favorable  terms  can  be  obtained  in  buying. 

Marking:  "Wherever  practicable  a  government  mark 
is  placed  upon  all  articles  supplied  by  His  Majesty's  Sta- 
tionery Office  as  a  safeguard  against  their  improper  use. 

Storage:  "As  far  as  space  allows,  a  stock  equal  to  six: 
months'  supply  is  kept  by  His  Majesty's  Stationery  Office 
of  all  articles  for  which  there  is  a  regular  demand,  sav- 
ing only  perishable  material,  such  as  printing  paper, 
which  is  ordered  as  required  under  running  contracts. 
No  store  is  kept  of  articles  for  which  there  is  only  an 
occasional  demand,  the  government  departments  requir- 
ing them  holding  their  own  stock.  The  same  arrange- 
ment applies  to  printed  forms,  other  than  official  publi- 
cations (which  will  be  dealt  with  under  a  separate  head- 
ing), His  Majesty's  Stationery  Office,  in  this  case,  pro- 
tecting itself  against  having  to  pay  fresh  charges  for 
composition  when  the  forms  are  reprinted  by  inserting  a 
clause  in  the  contracts  that  the  type  shall  be  kept  stand- 
ing for  a  specified  period. 

Issue  of  Supplies:  "Departments  are  expected  to  de- 
mand supplies  equal  to  about  six  months'  consumption  to 
obviate  the  economic  disadvantage  of  purchasing  small 
quantities.  The  distribution  of  printing  and  stationery  is 
arranged  through  the  medium  of  clerks  of  stationery  in 
the  various  government  departments.  Requisitions  are 
made  by  these  officials  on  special  forms  issued  by  His 
Majesty's  Stationery  Office,  which,  with  certain  excep- 
tions to  be  specified,  are  sent  to  that  department.  As  a 
guarantee  that  the  articles  demanded  are  necessary  for 
the  work  of  the  department,  each  form  must  be  counter- 
signed by  an  official  of  superior  rank. 

Direct  Purchases:  "The  privilege  of  direct  communi- 
cation with  contractors  is  allowed  to  certain  departments 

205 


BRITISH  FINANCIAL  ADMINISTRATION 

whose  work  involves  specially  urgent  or  confidential 
printing.  Special  forms  of  demand  are  issued,  on  receipt 
of  which  the  contractor  will  execute  the  work  required, 
the  demands  being  afterwards  forwarded  to  His  Maj- 
esty's Stationery  Office  for  the  issue  of  covering  orders 
to  the  contractor  and  for  purposes  of  account.  It  is  of 
course  understood  that  the  use  of  these  forms  is  restricted 
to  cases  of  absolute  necessity. 

Official  List  of  Articles  Furnished:  "Lists  of  articles 
authorised  by  His  Majesty's  Treasury  for  use  in  the  pub- 
lic service  are  issued  to  the  clerks  of  stationery,  and  arti- 
cles not  on  the  approved  list  are  only  supplied  to  depart- 
ments that  have  special  need  of  them.  In  the  case  of 
printed  matter  a  small  pamphlet  is  issued  for  the  purpose 
of  instructing  the  departments  how  'copy'  may  be  pre- 
pared in  a  form  which  can  be  most  economically  printed. 

Allotment  of  Funds  for  Printing  to  the  Several  De- 
partments: "Also  the  printing  for  each  department  of 
the  service  is  restricted  to  an  annual  allowance  based  on 
the  expenditure  of  previous  years  and  the  estimate  re- 
quirement of  the  department  concerned.  A  record  is 
kept  and  the  allowance  may  not  be  exceeded  without 
treasury  sanction  being  first  obtained. 

Control  by  Stationery  Office:  "On  receipt  at  His  Maj- 
esty's Stationery  Office  the  demands  pass  through  the 
hands  of  technical  experts,  who  scrutinise  them  most 
carefully  with  a  view  to  effecting  economies  in  quality  of 
paper,  printing,  etc.  Attention  is  also  given  to  the 
requisitions  with  the  object  of  checking  extravagance. 

Delivery:  "As  regards  the  actual  issue  of  the  articles, 
departments  in  the  London  district  are  served  by  motor 
vans  belonging  to  His  Majesty's  Stationery  Office;  out- 
side this  area  advantage  is  taken  of  the  cheapest  available 

206 


STATIONERY  OFFICE 

means  of  transit,  the  cost  being  borne  on  the  vote  of  the 
department  to  which  the  supply  is  made.  In  the  case  of 
large  quantities  of  one  article  required  for  a  particular 
service,  arrangements  are  sometimes  made  for  direct 
delivery  by  the  contractor,  samples  from  the  supply  being 
sent  to  His  Majesty's  Stationery  Office  for  examina- 
tion. Paper  required  by  printing  and  binding  contractors 
is  issued  to  them  in  bulk,  the  contractor  being  required  to 
render  an  exact  account  of  its  consumption. 

Printing  and  Distribution  of  Public  Documents:  "His 
Majesty's  Stationery  Office  is  responsible  for  the  printing 
and  distribution  of  all  official  government  publications  in 
the  United  Kingdom.  These  are  divided  into  two 
classes:  (a)  Parliamentary  Papers,  which  include  bills 
and  acts  of  Parliament,  papers  presented  to  both  Houses 
by  command  of  His  Majesty,  and  papers  ordered  printed 
by  either  House,  (b)  Stationery  Office  Publications, 
which  comprise  all  the  official  publications  issued  by  His 
Majesty's  Stationery  Office  for  sale  to  the  public  other 
than  those  included  under  'a.'  A  stock  of  these  publica- 
tions, sufficient  to  meet  the  requirements  of  the  public 
departments,  is  held  at  His  Majesty's  Stationery  Office, 
arrangement  for  sales  to  the  public  being  in  the  hands  of 
contractors,  who  pay  a  certain  premium  for  the  right  of 
holding  the  contract.  There  are  a  few  exceptions  to  this 
arrangement,  while  in  Scotland,  His  Majesty's  Stationery 
Office  has  recently,  by  way  of  experiment,  dispensed  with 
the  services  of  an  agent  and  is  now  selling  direct  to  the 
public. 

Waste:  "The  disposal  of  waste  paper  is  also  carried 
out  under  contract,  the  contractor  paying  a  certain  sum 
to  His  Majesty's  Office  for  the  privilege." 

Powers    of    Stationery    Office    to    Control    Expenditures. 
Though  the  powers  of  the  Stationery  Office  to  control  the  ex- 

207 


BRITISH  FINANCIAL  ADMINISTRATION 

penditures  of  the  several  services  by  questioning  and  revising 
their  requisitions  are  not  so  clear  as  in  the  case  of  the  Office  of 
Works  and  Public  Buildings,  the  commission  was  informed 
that  the  Stationery  Office  did,  in  fact,  carefully  scrutinize  all 
requisitions  made  upon  it,  for  the  purpose  of  determining 
whether  a  real  need  existed  for  the  articles  requisitioned  and 
whether  a  cheaper  grade  of  articles  than  the  ones  asked  for 
would  not  suffice.  It  would  appear  that  this  control  is  much 
stricter  in  regard  to  printing  and  the  supply  of  forms  than  is 
the  case  with  respect  to  paper  and  ordinary  stationery  sup- 
plies. We  thus  read  in  the  report  of  the  Select  Committee  on 
Publications  and  Debates  Reports : x 

"As  the  result  of  the  recommendations  of  previous 
Committees,  Departments  increasingly  consult  the  Sta- 
tionery Office  before  work  is  carried  out.  A  Revising 
Branch  of  that  Office  was  established  in  1907,  through 
which  control  is  exercised  over  the  requisitions  of  Depart- 
ments ;  and  it  is  estimated  that  a  saving  has  been  effected 
by  its  action,  during  the  four  years  of  its  existence,  of 
about  £110,000,  many  of  the  items  being  recurring." 

1 1911,  p.  v. 


CHAPTER    XI 
THE  AUDIT  OF  PUBLIC  ACCOUNTS 

History  of  Development  of  the  Present  Audit  System;  Status  of  the 
Comptroller  and  Auditor  General;  The  Method  of  Keeping  and 
Rendering  of  Accounts  Prescribed  by  the  Treasury ;  Audit  of  Pub- 
lic Accounts;  Powers  of  Comptroller  and  Auditor  General  in  Re- 
spect to  Disallowance  of  Items;  Duty  of  Comptroller  and  Auditor 
General  in  Respect  to  the  Control  of  Unwise  or  Extravagant  Ex- 
penditures; Standing  Committee  of  Public  Accounts  of  the  House 
of  Commons. 

More  than  once  allusion  has  been  made  to  the  remarkable   Constitu- 
tional Sig- 
fact  that  though  almost  from  the  beginning  of  constitutional   nificance  of 

government  in  England  the  theory  has  been  held  that  the  con-  Au  lt; 
trol  of  the  public  purse  lay  in  the  House  of  Commons,  that 
body  failed,  until  a  very  recent  date,  to  develop  the  means 
through  which  that  control  might  in  fact  be  made  effective. 
We  have  traced  the  development  of  certain  of  these  means 
in  our  account  of  the  rise  of  an  appropriation  system  and  the 
requirement  that  the  Executive  shall  keep  and  render  to  the 
House  accurate  reports  regarding  the  manner  in  which  the 
funds  granted  to  it  are  expended. 

Important  as  these  means  are,  they  evidently  fail  fully  to 
meet  the  requirements  of  complete  control  unless  they  are 
supplemented  by  some  system  by  which  the  House  may  sub- 
ject these  accounts  to  an  inspection  with  a  view  to  determin- 
ing whether  they  in  fact  represent  a  real  carrying  out  of  the 
conditions  imposed  in  making  the  grants.  "I  have  always  been 
greatly  struck,"  declares  Lord  Welby  in  his  testimony  before 
,the  Select  Committee  on  National  Expenditures,1  "by  the  fact 
that  for,  you  may  say,  a  hundred  and  sixty  years,  the 

1902,  p.  175. 

209 


BRITISH  FINANCIAL  ADMINISTRATION 

House  of  Commons,  always  anxious  to  establish  its  control, 
should  have  remained  all  that  time  under  the  illusion  that  it 
could  control  expenditure  by  putting  checks  upon  the  issue  of 
money  from  the  Exchequer  instead  of  ascertaining  how  the 
money  had  been  spent.  It  is  most  singular  that  all  the  able 
men  who  represented  the  House  of  Commons  during  that  time 
should  have  remained  under  that  illusion."  "The  fact  is,"  he 
elsewhere  stated,1  "that  Chancellors  of  the  Exchequer,  their 
advisers,  and  Parliament  itself  were  still  under  the  illusion  that 
Parliamentary  control  over  expenditure  could  be  effectively 
secured  by  safeguards  on  the  issue  of  money  from  the  Ex- 
chequer without  following  the  expenditure  further." 

History  of  Development  of  the  Present  Audit  System.  Ob- 
vious as  this  fact  now  is,  it  was  not  until  the  middle  of  the 
nineteenth  century  that  it  was  fully  realized  or  at  least  until 
then  no  adequate  means  were  provided  for  an  audit.  The  idea 
of  an  examination  of  some  accounts,  and  some  attempt  to  put 
this  idea  into  execution,  it  is  true,  can  be  found  in  earlier  years. 
"There  was,  indeed,"  writes  Lord  Welby  in  his  Memorandum 
on  the  Control  of  the  House  of  Commons  over  the  Public  Ex- 
penditure,2 "an  audit  conducted  by  officers  of  the  Exchequer 
under  regulations  framed  for  the  times  of  the  Tudors  and 
Stuarts.  It  was  left  unaltered  at  the  Revolution  of  1688, 
and  for  nearly  a  century  afterwards.  It  limped  leisurely 
along,  so  much  so  that  in  1 782  great  accounts  twenty  and  thirty 
and  the  i8th  years  old  were  still  open,  and  there  were  accounts  not  yet  set- 
tled which  went  back  to  the  reign  of  William  III.  But  this 
limping  audit  was  not  an  audit  for  Parliament.  The  accounts 
when  audited  were  not  submitted  to  Parliament;  they  were 
declared  before  and  passed  by  the  Treasury,  and  the  author- 
ity of  the  Treasury  in  passing  them  was  unquestioned." 

The  great  defect  in  this  system  was  not  merely  that  the  ex- 

1  Report  of  Committee  on  National  Expenditure,  1902,  p.  229. 
J  Report  of  Committee  on*  National  Expenditure,  1902,  Appendix 
No.  13,  p.  228. 

2IO 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

amination  of  accounts  was  made  in  a  dilatory  and  inefficient 

way,  but  that  this  examination  was  made  by  the  branch  of  the  Defects  in 

System 

Government  responsible  for  making  the  expenditures. 

i 

"Here  was  the  great  blot  of  our  financial  system.  De- 
fects in  the  Estimates  and  in  the  method  of  voting  them 
were  gradually  removed,  but  the  chief  defect  of  all,  that 
the  House  of  Commons  did  not  know  how  its  grants  had 
been  expended,  remained  unremedied  until  the  Exchequer 
and  Audit  Act  came  into  force.  It  is  singular  that  two 
of  our  greatest  Chancellors  of  the  Exchequer,  Mr.  Pitt 
and  Sir  Robert  Peel,  did  not  seize  the  point.  It  is  the 
more  singular  as  regards  Mr.  Pitt,  because  he  reformed 
the  system  of  audit,  he  swept  away  the  old  audit  by  Offi- 
cers of  the  Exchequer  and  transferred  the  duty  to  a  new 
authority,  the  Board  of  Audit,  which  he  endowed  with 
considerable  powers.  The  audit  applied  by  the  new 
Board  was  effective  as  far  as  it  went,  and  prompt  as  com- 
pared with  that  of  the  Exchequer  Officers,  but  he  made 
no  provision  for  laying  the  results  of  the  audit  before  the 
House  of  Commons.  The  Treasury  passed  the  audited 
accounts,  it  owed  no  responsibility  to  Parliament  in  re- 
spect to  them,  and  remained,  as  under  the  previous  sys- 
tem, master  of  the  situation."  1 

A  great  opportunity  to  correct  this  defect  was  presented 
in  1834  when  the  old  Exchequer  was  abolished  and  provision 
was  made  for  a  new  officer  known  as  Comptroller  of  the  Ex- 
chequer, who  was  to  have  control  over  the  custody  of  public 
funds  and  whose  authorization  was  required  before  any  mon- 
eys could  be  drawn  from  the  Treasury.    In  the  creation  of  this  The  Devel- 
office  the  idea  of  Parliament  was  to  protect  the  Treasury  by  the  Present 
controlling  issues  from  the  Treasury  for  expenditure  purposes.    system 
These  issues  were  simply  advances  of  large  sums  to  disbursing 
officers  as  authorized  by  appropriation  acts ;  they  were  not  ex- 
penditures proper. 

1  Lord  Welby  Memorandum,  etc.,  p.  228. 

211 


BRITISH  FINANCIAL  ADMINISTRATION 

The  credit  of  developing-  and  having  adopted  the  modern 
principle  of  control  through  an  examination  of  the  expendi- 
tures themselves  Lord  Welby  ascribes  primarily  to  Sir  James 
Graham,  who  became  first  Lord  of  the  Admiralty  in  1831,  and 
the  Public  Monies  Committee  of  1856-7. 

"In    1831    that   most    able   administrator,    Sir   James 
Graham,  became  First  Lord  of  the  Admiralty.    He  found 
the  civil  branches  of  that  department  organised  as  they 
had  been  organised  in  the  time  of  Elizabeth.     He  left 
them  organised  on  the  principle  that  has  worked,  and 
worked  well,  to  the  present  day.     Sir  James  Graham's 
speech  in  moving  the  Navy  Estimates  of  1831  is  of  his- 
torical interest.     In  the  course  of  it  he  said  that  he  and 
Mr.  Hume  in  1829  and  1830,  when  calling  attention  to 
the  Navy  Estimates,  'had  too  much  neglected  the  details 
of  the  Estimates  in  their  anxiety  to  effect  a  tangible 
reduction  of  the  general  sums  of  the  Votes.     Had  they 
not  been  so  much  occupied  in  pointing  out  savings,  they 
would  have  effected  much  benefit  in  investigating  how 
far  the  actual  expenditure  under  each  head  squared  with 
each  Estimate.    The  only  remedy  which  he  saw  then  was 
to  lay  before  the  House  annually  a  balance  sheet,   in 
which  would  be  specifically  placed  under  each  head  the 
actual  expenditure  of  the  Navy  and  Victualing  Boards.' 
Parliament  in  consequence,  and  at  his  instance,  passed  an 
Act  requiring  the  Admiralty  annually  to  present  such  an 
account  to  the  House  of  Commons.    This  account,  called 
the  Navy  Appropriation  Account,  has  been  annually  pre- 
sented up  to  the  present  time.    It  is  based  on  the  audited 
account  of  naval  expenditure,  and  it  shows  the  actual 
expenditure,  as  ascertained  by  the  auditor,  under  each 
head  of  service.    The  precedent  thus  created  was  applied 
in  later  years  to  other  great  divisions  of  the  public  ex- 
penditure, and  has  formed  the  model  on  which  the  Ap- 
propriation Accounts  of  public  expenditure  are  now  ren- 

212 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

dered.  It  is  the  first  instance,  as  far  as  I  am  aware,  in 
which  a  minister  grasped  the  importance,  I  might  say  the 
necessity,  of  laying  before  the  House  of  Commons  a 
return  of  actual  expenditure;  but  it  was  an  isolated  in- 
stance, applying  to  only  one  branch  of  expenditure,  and 
there  being  no  provision  in  the  Act  which  forced  the 
House  of  Commons  to  pass  a  judgment  on  the  Account, 
it  practically  passed  year  by  year  without  the  notice 
which  it  deserved."  * 

Though  the  precedent  thus  established  of  having  an  audited 
statement  of  actual  expenditures  laid  before  Parliament  an-  Further 
nually  was  gradually  extended  to  certain  other  services,  and  Evolution 
notably  to  the  War  and  Ordnance  Offices  in  1846,  the  next 
step  of  real  importance  was  not  taken  until  twenty-five  years 
later.  This  step  consisted  in  the  appointment  in  1856,  and 
the  report  in  1857,  of  the  able  committee  of  the  House  of 
Commons  on  the  receipt,  issue  and  audit  of  public  moneys  in 
the  Exchequer,  the  Pay  Office  and  the  Audit  Department.  Re- 
garding this  committee,  which  is  usually  known  by  the  name 
of  the  Public  Monies  Committee  of  1856-7,  Lord  Welby,  in 
his  testimony  before  the  Committee  on  National  Expenditures, 
1902,  said:  2 

"It  was  only  very  gradually  that  the  change  [*'.  e.,  to 
the  modern  system  of  audit]  took  place.  That  change  is 
marked  by  that  very  remarkable  Committee  of  1856-7, 
the  Public  Monies  Committee,  which  is,  I  think,  one  of 
the  most  remarkable  Committees,  both  as  regards  its  con- 
stitution and  the  work  it  did,  that  I  remember.  The  Pub- 
lic Monies  Committee  knocked  on  the  head  once  for  all 
the  idea  that  any  effective  control  could  be  exercised  by 
watching  the  issue  of  money  from  the  Exchequer  and 
showed  that  the  real  control  of  Parliament  must  be  by 

1  Lord  Welby  Memorandum,  etc.,  p.  229. 
"Report,  p.  175. 

213 


BRITISH  FINANCIAL  ADMINISTRATION 

ascertaining,    through   independent   officers   of    its   own, 
how  the  money  had  been  spent." 

This  committee  made  a  number  of  recommendations  cover- 
ing a  wide  range  of  topics,  many  of  which  were  approved  by 
Parliament  and  incorporated  into  law.  Indeed,  it  is  not  too 
much  to  say  that  this  report  laid  the  basis  for  the  whole  mod- 
ern system  of  financial  management  and  control.  We  shall 
have  occasion  in  other  places  to  speak  of  a  number  of  these 
recommendations.  In  respect  to  the  particular  subject  under 
consideration,  it  recommended  in  the  strongest  terms  possible 
the  extension  of  the  principle  of  laying  before  Parliament  an- 
nual statements  of  audited  expenditures  of  all  branches  of  the 
public  service.  Furthermore,  it  brought  out,  in  a  way  that 
had  never  been  done  before,  the  imperative  necessity  that  this 
audit  and  report  should  be  made  by  officers  of  Parliament 
itself  responsible  only  to  that  body  for  the  manner  in  which 
they  performed  their  duties.  The  report  thus  said : 1 

"The  concurrent  audit  or  appropriation  check  first  ap- 
plied to  the  expenditure  of  the  grants  for  naval  services 
in  1832,  and  subsequently  extended  to  the  several  Army 
grants,  was  a  new  security  introduced  for  ensuring  the 
strict  appropriation  of  the  grants  of  Parliament.  It  was 
not  intended  to  limit  the  discretion  of  the  responsible 
Departments  of  the  Executive  Government  in  which  it 
was  established,  but  to  secure  a  revision  of  their  accounts 
by  an  independent  authority,  invested  with  sufficient 
power  of  investigation  to  detect  any  misapplication  of  the 
Votes,  or  any  deviation  from  the  appropriations  sanc- 
tioned by  Parliament.  This  check  now  applies  to  the 
Naval  and  Military  expenditure,  and  is  regulated  by  the 
provisions  of  an  Act  passed  in '1846,  also  to  the  expendi- 
ture of  the  Offices  of  Woods  and  Forests,  and  Public 
Works,  and  the  Commissioners  of  Audit  transmit  an- 
nually to  the  Treasury,  for  presentation  to  the  House  of 
1  See  Report  of  Committee  on  National  Expenditure,  1902,  p.  229. 

214 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

Commons,  accounts  of  Naval  and  Military  expenditure 
compared  with  the  grants,  accompanied  by  reports  in 
which  they  direct  attention  to  every  departure  from  the 
provisions  of  the  Appropriation  Act.  Your  Committee 
recommend  that  this  important  check  upon  the  applica- 
tion of  the  public  money  be  extended  to  the  accounts  of 
the  income  and  expenditure  kept  at  the  Treasury,  to  the 
accounts  of  the  Revenue  Departments,  and  to  the  various 
accounts  comprising  the  expenditure  of  the  Votes  for 
Civil  Services,  including  Civil  Contingencies.  .  .  .  Your 
Committee  are  also  of  opinion  that  the  whole  of  these 
accounts,  finally  audited,  should  be  presented  to  Parlia- 
ment before  the  close  of  the  year  succeeding  that  to  which 
they  relate.  .  .  . 

".  .  .  Your  Committee  suggest  that  the  Audit  Board 
should  no  longer  transmit  through  the  Treasury  those 
accounts  which  they  are  bound  to  lay  before  Parliament, 
but  should  communicate  them  direct,  and  that  the  appro- 
priation and  inspection  of  Army  and  Navy  Accounts,  the 
selection  of  officers  for  the  respective  duties,  their  re- 
moval or  dismissal  should  rest  entirely  with  the  Audit 
Board. 

"Your  Committee  have  recommended  a  large  extension 
of  the  duties  and  powers  of  the  Board  of  Audit.  If  these 
suggestions  be  adopted  it  will  be  necessary  that  the  com- 
position and  relative  position  of  this  Board,  as  a  great 
department  of  State,  should  be  reconsidered  by  the  Exec- 
utive Government.  The  Board  of  Audit  is  responsible  to 
Parliament  alone,  and  the  station  and  emoluments  of  the 
person  at  the  head  of  it  should  be  equal  to  the  importance 
of  the  duties  to  be  performed,  and  not  second  in  rank  to 
any  of  the  permanent  officers  presiding  over  other  prin- 
cipal departments." 

Though  action  did  not  immediately  follow  this  report,  it, 
as  Lord  Welby  expresses  it,  "practically  decided  the  form  in 

215 


which  parliamentary  control  over  expenditures  should  be  es- 
tablished." The  two  great  recommendations  of  the  commit- 
tee— that  provision  should  be  made  for  a  standing  committee 
of  the  House  of  Commons,  to  whom  all  audited  accounts 
should  be  referred  for  consideration  and  report,  and  that  all 
accounts  of  the  Government  should  be  audited  by  an  officer 
directly  representing  Parliament  and  independent  of  the 
Crown — were  adopted,  the  one  in  1861  through  a  standing 
order  to  that  effect,  and  the  other  in  1866  through  the  passage 
of  the  famous  Exchequer  and  Audit  Departments  Act 
(I866).1 

The  passage  of  this  act  marks  almost  the  final  stage  in  the 
evolution  of  the  present  system  of  public  expenditures.  It 
stands  on  the  statute  books  in  almost  the  same  form  in  which 
it  was  originally  enacted,  such  amendments  as  have  been  made 
to  it  covering  little  more  than  matters  of  detail.  "The  House 
of  Commons,"  to  quote  Lord  Welby  again,  "learned  at  last 
that  it  could  not  insure  correct  appropriation  by  cumbrous 
checks  imposed  before  the  expenditure  took  place,  and  that  it 
could  only  enforce  its  control  by  early  audit  of  the  expendi- 
ture after  it  had  taken  place  and  by  examining  itself  the  re- 
sults of  that  audit." 

Status  of  the  Comptroller  and  Auditor  General.  To  under- 
stand the  status  and  functions  of  the  Comptroller  and  Auditor 
General  one  must  start  with  an  appreciation  of  the  fact  that 
the  public  funds  technically  are  neither  in  the  possession  nor 
under  the  control  of  the  Crown.  Legally  such  possession  and 
control  are  in  Parliament.  The  latter  merely  grants  authority 
to  draw  upon  these  funds  for  certain  designated  purposes  and 
in  certain  specified  amounts.  It  is  the  function  of  the  Comp- 
troller and  Auditor  General,  acting  as  the  direct  representa- 
tive and  officer  of  Parliament,  to  see  that  no  funds  are  drawn 
from  the  Exchequer  except  in  pursuance  of  authority  given 
by  Parliament,  and  that  such  funds  as  are  drawn  are  applied 

1 29  and  30  Viet.,  c.  39. 

216 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

only  to  the  specific  purposes  and  in  the  way  ordered  by  that 
body. 

The  great  reform  from  the  auditing  standpoint  that  was 
accomplished  by  the  act  of  1866  was  not  only  the  provision 
that  all  accounts  of  the  Government  should  be  audited,  but  also 
that  this  audit  should  be  by  an  officer  of  Parliament  making  The 

'    Auditor 

report  directly  to  it.  That  this  theory  of  the  status  of  the  General 
Comptroller  and  Auditor  General  might  be  fully  carried  out 
in  practice,  it  was  necessary  to  give  to  this  officer  such  a  posi- 
tion as  would  render  him  independent  of  the  executive  the 
acts  of  which  it  was  his  duty  to  control.  This  was  secured 
by  the  provisions  that,  though  the  Comptroller  and  Auditor 
General  is  appointed  by  the  Crown,  he  holds  office  during 
good  behavior  and  can  be  removed  only  on  an  address  from  of  Executive 
the  two  Houses  of  Parliament,  and  that  his  salary  constitutes 
a  permanent  charge  upon  the  Consolidated  Fund.  The  same 
provisions  which  are  employed  to  secure  the  independence  of 
judges  were  thus  applied  to  him. 

In  making  this  statement  it  is  necessary,  however,  to  dis- 
tinguish between  the  personal  independence  of  the  Comptroller 
and  Auditor  General  and  that  of  the  office  held  by  him.  All 
that  the  provision  given  above  accomplishes  is  to  ensure  that 
the  Comptroller  and  Auditor  General  shall  be  in  a  position 
where  he  can  exercise  such  authority  as  is  conferred  upon  him 
with 'perfect  independence  of  the  Crown.  When  we  come  to 
consider  the  scope  of  his  authority,  and  especially  the  pow- 
ers that  he  possesses  to  determine  accounting  procedure,  on 
matters  such  as  the  organization  and  personnel  of  even  his 
own  office,  we  encounter  the  rather  remarkable  fact  that  final  Subject, 

However,  to 
authority  rests  not  in  his  hands,  but  in  those  of  the  Treasury.   Adminis- 

The  Exchequer  and  Audit  Departments  Act  thus  provides  that  * 
"the  Treasury  shall  from  time  to  time  appoint  the  officers, 
clerks  and  other  persons  in  the  department  of  the  Comptroller 
and  Auditor  General"  ;  that  "Her  Majesty  by  Order  in  Council 
may  from  time  to  time  regulate  the  numbers  and  salaries  of 
the  respective  grades  or  classes  into  which  the  said  officers, 

217 


BRITISH  FINANCIAL  ADMINISTRATION 


The  Office 
Kept  "Out 
of  Politics" 


Prescribed 
by  the 
Treasury 


Regulations 
of  Auditor 
General 


clerks  and  others  shall  be  divided" ;  that  the  Comptroller  and 
Auditor  General  may  have  power  to  frame  orders  and  regula- 
tions for  the  internal  business  of  his  department,  but  that  such 
orders  shall  not  be  issued  nor  have  validity  until  "all  such  or- 
ders and  forms  shall  be  approved  by  the  Treasury." 

The  Method  of  Keeping  and  Rendering  of  Accounts  Pre- 
scribed by  the  Treasury.  Strictly  in  line  with  this  theory  of 
preserving  the  administrative  authority  of  the  Treasury  over 
the  management  of  the  public  finances  is  the  provision  that 
the  Treasury,  and  not  the  Comptroller  and  Auditor  General, 
shall  be  the  authority  to  determine  the  manner  in  which  all 
public  accounts  shall  be  kept  and  rendered.  The  act  thus 
reads :  "The  Treasury  shall  determine  by  what  departments 
such  accounts  [i.  e.,  appropriation  accounts]  shall  be  prepared 
and  rendered  to  the  Comptroller  and  Auditor  General" ;  that 
"a  plan  of  account  books  and  accounts,  adapted  to  the  require- 
ments of  each  service  in  order  to  exhibit  in  a  convenient  form 
the  whole  of  the  receipts  and  payments  in  respect  of  each  vote, 
shall  be  designated  under  the  supervision  of  the  Treasury,  and 
Her  Majesty  may,  from  time  to  time,  by  Order  in  Council,  pre- 
scribe the  manner  in  which  each  department  shall  keep  its 
accounts" ;  that  any  official  receiving  public  moneys  "shall  at 
such  time  and  in  such  form  as  the  Treasury  shall  determine 
render  an  account  of  his  receipts  and  payments  to  the  Comp- 
troller and  Auditor  General" ;  and  that,  though  the  Comptroller 
and  Auditor  General  may  prepare  regulations  setting  forth 
the  time  and  form  in  which  accountants  shall  submit  their  ac- 
counts with  supporting  authorizations  and  vouchers,  "no  such 
regulations  shall  be  obligatory  on  such  accountants  until  they 
shall  have  been  approved  by  the  Treasury." 

The  foregoing  represents  a  reproduction  of  only  a  few  of 
the  more  significant  clauses  of  the  Exchequer  and  Audit  De- 
partments Act  bearing  upon  the  matter  of  the  prescribing  of- 
the  methods  to  be  followed  by  the  several  services  of  the  Gov- 
ernment in  keeping  and  rendering  their  accounts.  All  through 

218 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

the  act,  however,  constant  reference  is  made  either  to  the 
power  of  the  Treasury  itself  to  direct  how  this  or  that  feature 
of  the  accounting  system  shall  be  managed,  or  to  the  require- 
ment that  the  approval  of  that  department  shall  be  had  before 
regulations  otherwise  formulated  shall  have  validity. 

Audit  of  Public  Accounts.  A  description  has  already  been 
given  of  the  duties  of  the  Comptroller  and  Auditor  General 
as  a  comptroller  of  Exchequer  issues.  We  have  now  to  con- 
sider the  duties  of  this  officer  as  an  auditor  general.  In  this 
capacity,  Parliament,  by  the  Exchequer  and  Audit  Depart- 
ments Act  and  other  acts,  has  imposed  upon  the  Comptroller 
and  Auditor  General  the  duty  of  examining  and  auditing  all 
or  practically  all  the  accounts  of  the  Government,  whether  these 
accounts  relate  to  general  revenues  and  expenditures  or  to  the 
financial  operations  of  special  institutions  such  as  arsenals,  hos- 
pitals, etc.  In  some  cases  the  audit  required  is  a  detailed  one 
involving  the  examination  of  every  item  of  expenditure  with 
a  view  to  determining  whether  it  is  in  accordance  with  law, 
has  been  properly  authorized,  is  supported  by  proper  vouchers, 
etc.  In  other  cases  the  examination  represents  only  what  is  Procedure 
known  as  a  "test  audit,"  that  is,  an  audit  of  a  certain  class  of 
expenditures,  or  expenditures  during  a  particular  brief  period. 
Test  audits  of  this  kind  are  thus  made^of  store  accounts,  manu- 
facturing and  expense  accounts  of  the  Army  and  Navy,  manu- 
facturing establishments,  etc. 

It  is  manifestly  impracticable  to  attempt  in  this  place  to 
enter  into  any  detailed  consideration  of  the  procedure  em- 
ployed in  conducting  these  different  audits.  Our  interest  is  di- 
rected only  to  that  feature  of  the  work  of  the  Comptroller  and 
Auditor  General  which  bears  directly  upon  the  great  problem 
of  securing  control  over  the  expenditures  generally.  We  have 
seen  that  expenditures  fall  into  two  great  categories :  Those 
represented  by  Consolidated  Fund  services,  and  those  repre- 
sented by  the  supply  services.  The  audit  of  expenditures  of 
the  first  class  is  a  comparatively  simple  matter,  and  requires 

219 


BRITISH  FINANCIAL  ADMINISTRATION 

no  special  comment.  It  remains,  therefore,  for  us  to  consider 
only  the  work  of  the  Comptroller  and  Auditor  General  in  audit- 
ing the  expenditures  provided  for  by  the  supply  services.1 

As  has  been  pointed  out,  appropriations  are  made  for  the 
supply  services  in  the  form  of  votes,  and  designation  is  made 
in  the  estimates  of  the  subheads  under  which  each  vote  must 
be  accounted  for.  For  each  vote  an  official  of  the  department 
to  which  the  vote  relates  is  designated  by  the  Treasury  as  "ac- 
counting officer"  with  the  duty  of  controlling  and  rendering 
an  account  of  its  expenditures.  This  account  is  rendered  to 
the  Comptroller  and  Auditor  General.  Each  vote  is  the  sub- 
ject matter  of  a  separate  account.  There  are  thus  as  many 
accounts  as  there  are  votes.  These  accounts  constitute  the  so- 
called  "appropriation  accounts,"  which  as  audited  are  laid  be- 
fore Parliament  by  the  Comptroller  and  Auditor  General.  It 
will  be  noted  that  each  vote  is  treated  as  a  financial  entity,  and 
the  account  must  cover  the  receipt  as  well  as  the  expenditure 
side  of  the  vote.  This  is  a  matter  of  importance,  since  as  the 
result  of  the  system  of  appropriations  in  aid  many  votes  are 
credited  with  important  receipts.  As  described  by  the  official 
pamphlet,  "Control  and  Audit  of  Public  Receipts  and  Expendi- 
tures," 2  this  account  is  designed  to  show,  under  the  several 
subheads,  "the  amount  granted  by  Parliament  for  the  service, 
as  detailed  in  the  estimate,  the  expenditure  compared  with  the 
grant,  the  appropriations  in  aid  estimated  and  realised,  the  sur- 
plus or  deficit  under  each  subhead  of  the  vote,  with  an  accom- 
panying explanation  of  the  causes  which  led  thereto,  the  total 

1  Students   desiring   to   study   more   in   detail   the   accounting   and 
auditing  methods  of  the  English  Government  should  consult :    ( i )  The 
Exchequer  and  Audit  Departments  Act    (1866),   a   copy  of  which 
is  appended  to  this  report;    (2)    the  pamphlet  "Control  and  Audit 
of  Public  Receipts  and  Expenditures"  issued  by  the  English  Govern- 
ment   in    1907;    and    (3)    the    pamphlet    "General    Instructions    for 
Guidance  in   the   Examination  of  Accounts   in  the  Exchequer  and 
Audit  Department,"  Seventh  Edition  (Oct.  i,  1911).    These  are  not 
public  documents  in  the  ordinary  sense,  but  copies  can  probably  be 
secured  by  addressing  the  Comptroller  and  Auditor  General. 

2  P.  14. 

22O 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

surpluses  to  be  surrendered  to  the  Exchequer,  or  the  deficit  to 
be  voted  and  the  amount  of  extra  receipts  received  and  paid 
over  to  the  Exchequer." 

The  Exchequer  and  Audit  Departments  Act  provides  that 
these  accounts  shall  be  rendered  to  the  Comptroller  and 
Auditor  General  on  or  before  December  31  in  the  case  of 
the  army  vote,  and  on  or  before  November  30  in  the  case  of  Time  ?f 
the  other  votes ;  that  they  shall  be  audited  by  the  Comptroller  Accounts 
and  Auditor  General  and  transmitted  to  the  Treasury  not  later  Q" dA^°rt 
than  January  31  in  the  case  of  the  army  vote,  or  January  15 
in  the  case  of  the  other  votes;  and  that  the  Treasury  shall 
transmit  them  to  the  House  of  Commons  not  later  than  Febru- 
ary 15  and  January  31  respectively.  If  Parliament  is  not  sit- 
ting on  those  dates  the  audited  accounts  must  be  transmitted 
within  one  week  after  it  assembles.  It  follows  then  that  Par- 
liament, almost  immediately  upon  assembling  and  before  it 
has  received  the  estimates  for  the  year  to  come,  has  laid  be- 
fore it  an  audited  statement  of  the  manner  in  which  the  votes 
for  the  year  preceding  the  current  one  have  been  expended. 

It  is  evident  that  in  order  to  secure  this  prompt  rendition  of 
an  audited  account  of  expenditures,  the  work  of  audit  must 
not  be  postponed  until  the  account  is  rendered.  The  Exchequer 
and  Audit  Departments  Act  thus  provides  that  "in  order  that  Audit 

,  ...  r  ...  ,  .  Continuous 

such  examination  may,  as  far  as  possible,  proceed  pan  passu 
with  the  cash  transactions  of  the  several  accounting  depart- 
ments, the  Comptroller  and  Auditor  General  shall  have  free 
access,  at  all  convenient  times,  to  the  books  of  account  and 
other  documents  relating  to  the  accounts  of  such  departments, 
and  may  require  the  several  departments  concerned  to  furnish 
him  from  time  to  time,  or  at  regular  periods,  with  accounts  of 
the  cash  transactions  of  such  departments  respectively  up  to 
such  times  or  periods."  1 

Powers  of  Comptroller  and  Auditor  General  with  Respect 
to  Disallowance  of  Items.    To  students  familiar  with  the  audit- 
1  Sec.  28. 

221 


BRITISH.  FINANCIAL  ADMINISTRATION 

ing  system  of  the  United  States  Government  it  will  probably 
come  as  a  matter  of  surprise  that  the  powers  of  the  English 
Comptroller  and  Auditor  General  in  auditing  public  accounts 
are  confined  strictly  to  those  of  examination  and  report  and 
that  he  has  no  power  finally  to  disallow  an  item  of  expenditure 
which  in  his  opinion  has  been  improperly  made.  Under  the 
American  system  it  is  of  the  essence  of  the  powers  of  the 
auditor  in  settling  an  account  to  "suspend"  all  items  which 
appear  to  represent  an  improper  payment  or  one  for  which  a 
proper  voucher  or  other  authority  is  not  produced;  and  if  a 
satisfactory  explanation  is  not  then  forthcoming  finally  to  "dis- 
allow" such  items.  This  means  that  the  officer  rendering  the 
account  will  receive  no  credit  for  such  payment,  and  thus  he 
or  his  bondsmen  must  make  good  the  amount  by  securing,  if 
possible,  a  repayment  on  the  part  of  the  person  to  whom  the 
money  was  paid,  by  making  good  the  amount  out  of  his  own 
funds,  or  by  seeking  a  relief  from  the  liability  through  an  act 
of  Congress. 

Under  the  English  system  the  Comptroller  and  Auditor  Gen- 
eral, as  stated,  has  no  such  powers  to  disallow  an  item.  All 
that  he  can  do  is  to  bring  the  matter  to  the  attention  of  the 
Treasury  for  determination  as  to  what  action  shall  be  taken* 
It  is  certainly  a  remarkable  fact  that  this  latter  authority  ap- 
parently has  full  power  to  waive  any  irregularity  and  to  use 
its  free  discretion  as  to  whether  an  item  shall  or  shall  not  be 
allowed.  It  thus  exercises  a  power  which  under  the  American 
system  can  only  be  exercised  by  Congress  itself.  That  this  is 
the  law  appears  from  the  following  provisions  of  the  Ex- 
chequer and  Audit  Departments  Act  relative  to  this  matter: 

"If  during  the  progress  of  the  examination  by  the 
Comptroller  and  Auditor  General  hereinbefore  directed 
any  objection  should  arise  to  any  item  to  be  introduced 
into  the  appropriation  account  of  any  grant,  such  objec- 
tion shall,  notwithstanding  such  account  shall  not  have 
been  rendered  to  him,  be  immediately  communicated  by 

222 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

him  to  the  department  concerned,  and  if  the  objections 
should  not  be  answered  to  his  satisfaction  by  such  depart- 
ment, they  shall  be  referred  by  him  to  the  Treasury,  and 
the  Treasury  shall  determine  in  what  manner  the  items 
in  question  shall  be  entered  in  the  annual  appropriation 
account."  1 

"In  all  cases  in  which  an  accountant  may  be  dissatisfied 
with  any  disallowance  or  charge  in  his  accounts  made  by 
the  Comptroller  and  Auditor  General  such  accountant 
shall  have  a  right  of  appeal  to  the  Treasury,  who,  after 
such  further  investigation  as  they  may  consider  equitable, 
whether  by  viva  voce  examination  or  otherwise,  may 
make  such  order  directing  the  relief  of  the  appellant 
wholly  or  in  part  from  the  disallowance  or  charge  in  ques- 
tion, as  shall  appear  to  them  to  be  just  and  reasonable, 
and  the  Comptroller  and  Auditor  General  shall  govern 
himself  accordingly."  2 

The  vesting  of  this  power  to  allow  or  disallow  items  in  the 
Treasury  is  but  another  illustration  of  the  fact  that  Parlia- 
ment in  providing  for  an  audit  of  expenditure  by  its  own  offi-  N,°  Division 

.  J  of  Authority 

cer  was  yet  careful  to  retain  intact  the  general  principle  that 

the  Treasury  is  the  organ  upon  which  rests  the  general  re- 
sponsibility for  the  manner  in  which  the  finances  of  the  na- 
tion are  administered.  No  one  can  read  the  provisions  of 
the  Exchequer  and  Audit  Departments  Act  without  being  im- 
pressed with  the  strength  of  the  feeling  that  financial  responsi- 
bility should  not  be  weakened  by  distributing  control  between 
two  authorities. 

Duty  of  Comptroller  and  Auditor  General  in  Respect  to  the 
Control  of  Unwise  or  Extravagant  Expenditures.  There  has 
always  been  a  difference  of  opinion  on  the  part  of  students  of 
financial  administration  as  to  whether  the  functions  of  an 
auditor  or  comptroller  should  be  restricted  to  those  of  a  mere 

1  Sec.  31. 
1  Sec.  43. 

223 


BRITISH  FINANCIAL  ADMINISTRATION 


Control 
over. 
Questions 
of  Economy 


Auditor 
General's 
View  of 
His 
Powers 


examination  of  accounts  with  a  view  to  ensuring  that  the  laws 
and  regulations  governing  the  expenditure  of  funds  have  been 
complied  with,  or  whether  he  should  have  the  larger  responsi- 
bility of  seeing  that  funds  voted  are  applied  in  the  most 
economical  and  efficient  manner  possible.  For  example,  cases 
frequently  arise  where  one  service  will  pay  a  higher  price  for 
an  article  or  service  than  is  paid  by  another  service,  or  where 
the  accounts  will  reveal  that  one  service  will  make  use  of  much 
more  expensive  articles  than  are  used  by  other  services  for 
precisely  the  same  purpose.  In  all  these  and  many  other 
analogous  cases  where  expenditures  are  made  which  are  not 
justified  by  the  real  needs  of  the  service  making  them,  the  ques- 
tion arises  whether  it  is  the  duty  of  the  auditor  to  question 
and  if  need  be  disallow  the  items  representing  such  expendi- 
tures, even  though  the  technical  accounting  requirements  are 
met. 

Generally  speaking,  it  may  be  said  that  in  the  United  States, 
or  at  least  in  the  Federal  Government  of  the  United  States, 
auditors  have  no  such  function  or  powers.  The  furthest  that 
they  may  go  is,  in  extreme  cases,  to  call  the  matter  to  the  at- 
tention of  the  spending  department  and  suggest  a  change  of 
practice  in  the  future.  A  reading  of  the  report  of  the  Com- 
mittee on  National  Expenditure  (1902)  indicates  that  in  Eng- 
land a  feeling  exists  that  the  duties  of  the  Comptroller  and 
Auditor  General  should  go  further  than  this;  that  upon  him 
rests,  in  some  degree  at  least,  responsibility  for  checking  un- 
wise or  extravagant  expenditures.  Thus  we  find  the  clerk  in 
charge  of  estimates  in  the  Treasury  in  his  testimony  before 
the  committee  giving  the  following  replies  to  questions  put 
to  him  regarding  this  matter : 1 

"Is  not  the  examination  by  the  Comptroller  and  Audi- 
tor General  rather  one  in  respect  to  form,  and  audit,  and 
regularity,  than  in  respect  of  the  merit  of  the  expendi- 
ture? The  Comptroller  and  Auditor  General  frequently 


1  Report,  pp.  2-3. 


224 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

reports  to  -the  Public  Accounts  Committee  cases  in  which 
he  thinks  that  value  has  not  been  received  for  money. 

"Would  the  Comptroller  and  Auditor  General  go  so 
far  as  to  say  that  he  considered  this  or  that  establishment 
[i.  e.,  staff  and  force  of  clerks]  excessive?  Not  if  it  had 
been  sanctioned  by  the  Treasury. 

"The  point  I  want  to  get  at  is  this :  Assume  as  a 
hypothetical  case  that  there  is  a  Department  where  ex- 
travagance is  going  on,  where  the  establishment  is  exces- 
sive, or  where  too  much  money  is  being  spent,  who  would 
discover  that  and  stop  it?  If  the  establishment  is  exces- 
sive the  Treasury  must  discover  that  for  itself;  but  the 
other  kind  of  extravagance,  that  of  buying  goods,  for 
instance,  at  excessive  prices,  would,  I  think,  very  prob- 
ably be  discovered  by  the  Comptroller  and  Auditor  Gen- 
eral. 

"Is  that  distinctly  within  his  attributions?  He  cer- 
tainly calls  attention  to  cases,  for  instance,  where  an 
article  has  been  bought  by  the  War  Office  or  Admiralty 
at  one  price,  and  another  article  of  much  the  same  char- 
acter has  been  bought  at  a  different  price.  He  calls  atten- 
tion to  cases  of  that  kind  as  indicating  that  in  the  one  case 
there  may  have  been  extravagance. 

"Is  he  authorised  to  do  that;  is  it  a  part  of  the  dis- 
charge of  his  duties,  or  is  it  rather  an  occasional  and 
exceptional  act  on  his  part?  I  think  it  is  a  frequent  act 
on  his  part ;  but  I  am  not  aware  that  there  is  any  regula- 
tion binding  him  to  do  it." 

The  present  Comptroller  and  Auditor  General  in  a  personal 
interview  with  the  commission  gave  much  the  same  statement  His 

T          1 "     *1 

of  his  conception  of  the  duties  of  his  office  in  respect  to  the  p™wer  t 


as 


prevention  of  wasteful  expenditure.     It  is  to  be  noted  that  Officer  of 

,.  f  .  .  Parliament 

whatever  obligation  he  has  in  this  respect  is  not  in  consequence 

of  any  specific  duty  imposed  upon  him  by  law  or  regulation, 
but  rather  grows  out  of  his  status  as  the  officer  to  whom  Par- 

225 


BRITISH  FINANCIAL  ADMINISTRATION 


Auditor's 
Ultimate 
Remedy 
Lies  in 
Report  to 
Parliament 


liament  looks  to  keep  it  informed  regarding  the  manner  in 
which  the  funds  voted  by  it  are  in  fact  expended. 

To  the  commission  it  would  seem  that  this  is  a  duty  which 
should  be  discharged  to  a  far  greater  extent  than  it  apparently 
is  under  the  English  system,  and  that  there  is  no  reason  why 
the  Auditor  as  Comptroller  under  the  American  system  should 
not  do  the  same.  These  officers  have  passed  under  their 
scrutiny  the  vouchers  representing  expenditures  for  all  the 
services  of  the  Government.  They  are  in  a  peculiarly  favorable 
position  to  detect  whether  one  department  is  paying  higher 
prices  for  the  same  articles  or  services  than  others,  or  is  mak- 
ing an  apparently  lavish  or  unwise  expenditure  in  any  way. 
There  would  seem  to  be  no  reason  why  it  should  not  be  their 
specific  duty  to  call  all  such  cases  to  the  attention  of  the  head 
of  the  department  in  which  such  expenditure  takes  place,  and 
if  no  heed  is  given  to  such  notice,  to  mention  the  facts  in  their 
annual  reports.  In  most  cases  the  heads  of  the  departments 
are  only  too  glad  to  secure  information  regarding  the  man- 
ner in  which  affairs  are  being  conducted,  and  the  proper  ac- 
tion to  secure  economy  will  be  taken  without  any  publicity. 
Only  in  extreme  cases  will  it  be  necessary  to  mention  the  mat- 
ter in  official  reports.  It  would  probably  be  a  mistake  to  ex- 
tend the  duties  of  auditors,  with  respect  to  this  matter,  beyond 
this  point  of  calling  all  cases  of  apparent  waseful  expenditure 
of  money  first  to  the  attention  of  the  interested  service,  and 
then,  if  need  be,  to  the  authority  to  whom  report  is  made.  To 
do  more  would  be  to  substitute,  in  part  at  least,  the  responsi- 
bility of  the  auditor  for  that  of  the  administration.  This 
would  mean  a  division  of  authority  and  a  weakening  of  re- 
sponsibility on  the  part  of  officials  directly  responsible  for  the 
conduct  of  affairs,  that  would  be  in  the  highest  degree  un- 
fortunate. 

Standing  Committee  on  Public  Accounts  of  the  House  of 
Commons.  The  commission  has  taken  pains  to  point  out  how 
essential  to  the  establishment  of  real  control  on  the  part  of 

226 


the  fund  granting  authority  is  the  putting  into  operation  of  a 
system  by  which  that  authority  secures  a  complete  and 
thorough  report  on  the  manner  in  which  the  funds  granted  by  A  Means 
it  have  been  expended  by  an  officer  independent  of  the  spend-  °ative  ' 
ing  departments  and  responsible  to  it  alone.  Such  a  system 
England  finally  secured  through  the  creation  of  the  office 
of  Comptroller  and  Auditor  General  and  the  general  pro- 
visions regarding1  public  accounting  and  reporting  that  are 
contained  in  the  Exchequer  and  Audit  Departments  Act  of 
1866. 

Important  as  was  this  action,  one  further  step  had  to  be 
taken  before  England  could  fully  meet  the  requirements  of  a 
system  that  would  enable  the  House,  in  fact  as  well  as  in  the- 
ory, to  exercise  a  real  control  over  expenditures.  This  con- 
sisted in  the  provision  of  means  by  which  the  House  should 
avail  itself  of  the  information  furnished  to  it  by  the  audited 
statements  of  expenditures  which  it  required  of  its  officer,  the 
Comptroller  and  Auditor  General.  Without  the  existence  of 
means  of  this  character  through  which  the  House  would  con- 
sider, and  if  need  be,  act  upon  the  information  given  it,  the 
submission  of  the  audited  statements  of  expenditure  would  be 
but  an  empty  form.  As  Lord  Welby  pointed  out  in  com- 
menting upon  the  praiseworthy  act  of  the  Admiralty  in  inaugu-  An  Essential 

.         ...    .  ,.  to  Enforcing 

rating  the  system  of  audited  statements  of  expenditures,  this  Responsi- 
act  accomplished  little  immediate  good,  since,  "there  being  no  blllty 
provision  in  the  act  which  forced  the  House  of  Commons  to 
pass  judgment  on  the  account,  it  practically  passed  year  by 
year  without  the  notice  it  deserved." 

The  importance  of  ensuring  that  the  accounts  of  expendi- 
ture would  receive  due  consideration  at  the  hands  of  the  House 
of  Commons  did  not  escape  the  attention  of  the  great  Com- 
mittee on  Public  Monies  of  1856-7.  After  recommending 
that  there  be  a  complete  audit  of  all  public  accounts  by  an 
officer  of,  and  directly  responsible  to,  the  House  of  Commons, 
it  further  recommended  "that  these  audited  accounts  be  an- 
nually submitted  to  the  revision  of  a  Committee  of  the  House 

227 


BRITISH  FINANCIAL  ADMINISTRATION 


An  Instru- 
ment in  the 
Hands  of 
the 
Opposition 


of  Commons  to  be  nominated  by  the  Speaker."  This  sugges- 
tion was  one  of  the  first  recommendations  of  the  committee 
to  be  acted  upon.  In  1861  Mr.  Gladstone,  as  Chancellor  of 
the  Exchequer,  secured  the  adoption  of  a  standing  order  mak- 
ing provision  for  a  standing  committee  of  this  character  under 
the  title  of  Committee  on  Public  Accounts. 

In  this  committee,  which  has  had  an  uninterrupted  exist- 
ence since  that  date,  England  possesses  one  of  the  most  in- 
teresting features  of  her  whole  system  of  financial  adminis- 
tration. It  is  the  crowning  point  of  the  system  which  she  has 
step  by  step  built  up  through  which  a  real  control  over  public 
expenditures  is  secured.  Its  organization,  character  and  duties 
have  been  excellently  described  by  Mr.  Thomas  Gibson  Bowles, 
who  was  for  years  a  member  of  the  committee,  in  his  testi- 
mony before  the  Select  Committee  on  National  Expenditure 
(1902),  from  which  we  take  the  following: 1 

"The  Committee  of  Public  Accounts  is  a  Standing 
Committee  of  n  members  (I  think  it  has  been  increased 
now  to  15),  whereof  5  constitute  a  quorum.  It  was 
established  in  1862;  that  was  the  date  of  the  first  Stand- 
ing Order.  The  committee  is  nominated  at  the  com- 
mencement of  every  Session  by  the  House  of  Commons 
under  Standing  Order  57  for  the  'examination  of  ac- 
counts showing  the  appropriation  of  the  sums  granted  by 
Parliament  to  meet  the  public  expenditure';  a  phrase 
which,  as  will,  I  think,  be  seen,  by  no  means  completely 
describes  the  duties  it  performs,  those  duties  being  con- 
siderably wider  than  that  phrase  would  suggest.  The 
Chairman  of  the  Committee  is  by  usage  always  appointed 
from  amongst  the  members  of  the  Committee  belonging 
to  the  Opposition.  Though  not  restricted  to  the  ground 
covered  by  the  Comptroller  and  Auditor  General  in  his 
annual  Reports  on  the  Appropriation  Accounts,  the  Corn- 
Report  of  Select  Committee  on  National  Expenditure,  1902,  pp. 
65-66. 

228 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

mittee  in  its  usual  practice  is  guided  by  those  Reports  in 
its  selection  of  subjects  for  consideration,  and  of  the 
officials,  whether  Accounting  Officers  or  others  whom  it 
directs  to  attend  for  examination.  The  Comptroller  and 
Auditor  General  calls  its  attention  to  the  points  whereon 
question  has  arisen  during  the  audit  of  those  accounts 
conducted  by  himself  and  his  staff,  and  the  Committee 
elucidates  each  point  and  reports  on  the  whole  to  the 
House.  Thus  the  Comptroller  and  Auditor  General  is, 
to  a  large  extent,  the  acting  hand  of  the  Committee.  He 
detects  the  points  of  question,  presents  them  with  such 
information  concerning  them  as  he  has  obtained,  and 
leaves  the  Committee  to  pursue  them  further,  to  consider 
them,  and  report  on  them.  It  is  therefore  essential  that 
the  preliminary"  work  of  the  Comptroller  and  Auditor 
General  should  be  well  and  thoroughly  done,  or  the  Com- 
mittee may  fail  in  its  subsequent  work,  and  in  its  final 
object  of  securing  and  enforcing  Parliamentary  control 
over  the  public  accounts. 

"The  Comptroller  and  Auditor  General,  I  may  say,   The 

.  ,        ^  .  .     .  Auditor 

.always  attends  the  Committee  sittings,  as  does  also  a   General 
principal  permanent  officer  of  the  Treasury.     Now  the  ^e  s*aff, 
functions  of  the  Public  Accounts  Committee  extend  be-   the 
yond  the  formality  of  the  expenditure,  to  its  wisdom, 
faithfulness  and  economy.     Those  functions,  it  must  be 
remembered,  embrace  as  well  the  receipt  side  as  the  issue 
•side  of  the  account.     They  amount  to  an  enlarged  revi- 
sion of  the  Comptroller  and  Auditor  General's  Report  on 
his  Appropriation  audit.     They  supplement  the  inquiries 
made  by  him  and  his  officers  in  the  course  of  that  audit, 
by  further  inquiries  made  by  oral  examination,  not  alone 
of  the  Accounting  Officer  strictly  so  called,  but  of  any 
•other  officials  concerned  in  the  expenditures  whom  the 
Committee  may  call  before  them. 

"Moreover,  and  this  is  most  important,  the  functions 
•of  the  Committee  extend  to  a  supervision  over  the  form 

229 


BRITISH  FINANCIAL  ADMINISTRATION 


A   Critic 
of  Treasury 
Administra- 
tion 


and  number  of  the  Estimates  for  the  Grants  in  Supply, 
any  change  in  which  should  be  submitted  to  be  approved 
by  the  Committee  before  being  made,  as  was  done  in 
1867  and  1881. 

"The  Committee  has  always  shown  itself,  I  may  say, 
strongly  opposed  to  any  diminution  in  the  number  of 
Votes  of  which  the  Estimates  are  composed  as  being  cal- 
culated to  diminish  the  control  over  those  Votes  of  the 
House  of  Commons;  it  has  set  its  face  generally  against 
making  large  Votes  of  lump  sums,  and  has  favored  the 
subdivision  of  Votes  rather  than  their  inclusion  in  one.  I 
have  illustrative  references  here  to  a  number  of  documents 
with  which  I  need  not  at  present  trouble  the  Committee.. 

"I  may  add  that  the  functions  of  the  Committee  extend 
to  an  examination  of  the  executive  action  of  the  Treasury 
as  regards  its  compliance  with  the  law  (see  Second  Re- 
port, 1900).     With  so  wide  an  horizon,  so  considerable 
a  freedom  in  action,  and  so  great  opportunities  in  its 
methods  of  inquiry  as  the  Public  Accounts  Committee 
possesses,  its  capacities  for  public  uses  are  great.    It  does, 
actually  on  the  Appropriation  Accounts  what  the  House- 
of  Commons  does  theoretically  on  the  Estimates,  and 
does  it  to  far  more  purpose ;  for  it  deals  not  with  possibly 
inaccurate  Estimates  of  expenditure,  but  with  the  actual 
ascertained  expenditure  itself;  and  has  before  it  for  ex- 
amination,  not  alone  a  Minister  often  imperfectly   in- 
formed, but  the  very  officers  concerned  with  all  the  details, 
of  the  expenditure,  whom,  in  case  of  question,  it  puts 
upon  their  defence  and  elicits  their  first-hand  explana- 
tions.    As  a  check  upon,  not  merely  extravagant  or  un- 
authorised expenditure,  but  also  upon  unwise  methods  of 
management,  this  Committee  is  probably  more  effectual 
than  the  House  of  Commons  itself." 

We  have  reproduced  this  statement  of  the  work  and  province- 
of  the  Committee  on  Public  Accounts,  notwithstanding  the: 

230 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

length,  since  it  presents  in  a  peculiarly  authoritative  and  clear 
form  not  only  the  technical  duties  and  powers  of  the  commit- 
tee, but  the  spirit  in  which  these  duties  and  powers  are  ex- 
ercised.1 Mr.  Bowles  has  not  overdrawn  the  importance  of 
this  body  in  the  general  system  for  the  control  of  public  ex- 
penditures. All  officials  interviewed  by  the  commission  united 
in  affirming  the  important  place  that  it  occupied  and  the  great 
value  of  the  work  done  by  it.  Its  duties  are  taken  very  seri-  yrfat  f 
ously  by  the  members  of  the  committee  and  are  performed  the  Services 
with  the  utmost  conscientiousness.  Particular  notice  should  committee 
be  taken  of  the  wide  scope  of  its  powers.  It  is  not  limited  to 
the  investigation  of  points  raised  by  the  appropriation  ac- 
counts as  reported  by  the  Comptroller  and  Auditor  General: 
on  the  contrary,  it  has  the  power  to  scrutinize  and  report  upon 
almost  any  matter  having  to  do  with  the  management  of  the 
public  finances.  It  considers  the  form  in  which  the  estimates 
should  be  submitted ;  it  passes  upon  the  question  of  the  num- 
ber of  votes  under  which  appropriations  should  be  made  and 
the  subheads  under  which  an  accounting  should  be  had;  it 
examines  into  the  conduct  of  the  Treasury;  it  satisfies  itself 
as  to  whether  due  economy  and  efficiency  have  been  displayed 
by  the  several  services  in  the  expenditure  of  funds;  finally,  it 
pays  special  attention  to  the  technical  accounting  procedure 
employed  by  the  Government. 

To  such  an  extent  does  it  consider  this  latter  matter  that 
its  reports,  together  with  the  Treasury  minutes  setting  forth 
the  action  of  that  authority  on  the  recommendations  of  the 
committee,  constitute  in  effect  the  general  regulations  govern- 
ing the  accounting  methods  of  the  Government.  This  is  evi- 
denced by  the  fact  that  in  1911  the  Comptroller  and  Auditor 
General  caused  to  be  prepared  and  published  an  epitome  of  all 
the  reports  of  this  committee  since  its  establishment,  with  the 
Treasury  minutes  relating  thereto,  which  was  fully  indexed 
in  order  that  all  accounting  officers  might  readily  consult  the 

1  See  also,  Young:  The  System  of  National  Finance,  London,  1915. 

231 


BRITISH  FINANCIAL  ADMINISTRATION 


To  Insure 

Impartiality 

Committee 

Reports 

Findings 

to  Treasury 


This 
Practice 
Fastens 
Responsi- 
bility on 
Executive 


orders  that  have  been  issued  and  were  in  force  governing  ac- 
counting methods.1 

Another  point  of  no  little  importance  is  the  fact  that  this 
committee  both  in  its  personnel  and  its  work  is  essentially 
non-partisan  in  character.  With  the  chairman  chosen  from 
"the  opposition,"  there  is  no  danger  of  the  committee  pass- 
ing over  delinquencies  of  the  Executive  as  a  matter  of  party 
expediency.  On  only  two  occasions  has  the  custom  of  choos- 
ing the  chairman  from  "the  opposition"  been  departed  from. 
All  officials  interviewed  emphasized  in  the  strongest  way  pos- 
sible this  high  character  of  the  committee  and  the  spirit  in 
which  it  performs  its  duties. 

Finally,  attention  should  be  directed  to  the  skill  displayed 
in  adjusting  the  powers  of  this  committee  to  those  of  the 
Treasury.  We  have  already  seen  how  careful  Parliament  was, 
in  defining  the  duties  and  powers  of  the  Comptroller  and 
Auditor  General,  to  avoid  distributing  responsibility  for  the 
management  of  the  financial  affairs  of  the  nation  between 
that  officer  and  the  Treasury,  and  to  preserve  the  latter  body 
as  the  one  authority  possessing  final  responsibility  and  power. 
The  same  care  has,  consciously  or  unconsciously,  been  dis- 
played in  defining  the  function  of  the  Committee  on  Public 
Accounts.  This  committee,  with  all  its  great  powers  of  investi- 
gation and  report,  is  in  no  sense  the  supreme  authority  with 
respect  to  methods  of  financial  management.  Its  conclusions, 
as  embodied  in  its  reports,  in  themselves  have  no  force.  All 
of  its  recommendations  are  reported  to  the  Treasury :  they  are, 
in  effect,  recommendations  that  the  Treasury  do  this  or  that, 
or  that  it  require  that  this  or  that  be  done  by  the  services  it 
controls.  It  remains  for  the  Treasury  to  decide  whether 
it  will  or  will  not  act  upon  such  recommendations.  Its  de- 
cisions are  embodied  in  what  are  known  as  "treasury  min- 

1  Epitome  of  the  Reports  from  the  Committees  of  Public  Accounts 
1857  to  1910  and  of  the  Treasury  Minutes  thereon,  with  an  Index. 
The  compilation  goes  back  to  1857,  since  there  was  a  Committee  on 
Accounts  prior  to  the  establishment  of  the  Permanent  Standing  Com- 
mittee in  1862. 

232 


THE  AUDIT  OF  PUBLIC  ACCOUNTS 

utes,"  which  recite  the  recommendations  of  the  committee  and 
set  forth  the  action  that  the  Treasury  has  decided  to  take  upon 
them.  It  is  by  no  means  unusual  for  the  Treasury  to  decline 
to  put  the  recommendations  of  the  committee  into  force,  or 
at  least  to  adopt  them  in  a  partial  or  modified  form.  The 
Treasury,  of  course,  must  feel  that  it  is  on  very  solid  ground 
when  it  declines  to  act  upon  the  recommendation  of  the  com- 
mittee, and  it  takes  pains  to  point  out  in  its  minute  the  reasons 
for  such  refusal. 

This  absence  of  determinative  power,  together  with  the  fact 
that  the  House  as  a  whole  devotes  but  little  time  to  a  consid- 
eration of  the  reports  of  the  committee,  has  given  rise  to  a 
feeling  on  the  part  of  many  that  certain  changes  might,  with 
advantage,  be  introduced  into  the  system  as  it  now  exists.   Proposal 
We  thus  find  that  Mr.  Bowles,  though  strongly  emphasizing   Committee 
the  power  and  influence  of  the  committee,  yet  believes  that, 
in  two  respects  at  least,  its  system  could  be  improved.    In  his 
testimony,  to  which  allusion  has  been  made,  he  thus  said :  * 

"The  Public  Accounts  Committee,  however,  is  under 
some  serious  disadvantages.  It  has  no  power,  even  after 
the  most  minute  examination  and  on  the  clearest  evi- 
dence, to  disallow  any  item.  It  can  only  'call  attention' 
to  that  item.  Moreover  (and  this  I  think  is  serious), 
there  is  no  provision,  either  in  the  Standing  Orders  or  in 
the  unwritten  law  of  the  House  of  Commons,  providing 
for  the  certain  consideration  of  the  Reports  of  the  Public 
Accounts  Committee  in  which  it  has  called  attention  to 
matters  of  question.  Matters  of  very  high  financial  im- 
portance or  irregularities  and  abuses  of  a  most  mischiev- 
ous character  thus  escape  all  public  attention  or  Parlia- 
mentary discussion.  I  should  suggest  (and  this  I  suggest 
most  definitely)  that,  in  order  that  the  work  of  the  Com- 
mittee may  have  its  due  effect,  some  certain  occasion 
should  be  provided  for  the  consi4eration  by  the  House  of 

*  Report  of  Select  Committee  on  National  Expenditure,  1902,  p.  67. 

233 


BRITISH  FINANCIAL  ADMINISTRATION 


Would  Be 
in  Violation 
of  Principle 
of  Control 


Commons  of  its  Reports  when  presented,  and  for  taking 
a  decision  of  the  House  upon  the  recommendations  em- 
braced therein." 

Logical  as  this  action  would  seem  to  be,  it  yet  should  be 
recognized  that  any  step  having  for  its  effect  the  vesting  of 
discretion  in  the  committee  or  even  in  the  House  as  a  whole, 
except  possibly  when  the  issue  of  rules  of  the  most  general 
character  are  concerned,  would  represent  a  serious  inroad  upon 
the  fundamental  principle  now  enforced  that  responsibility 
for  action  rests  in  the  Treasury.  The  commission  doubts 
whether  Parliament  could  consistently,  or  would  seriously, 
consider  any  action  that  would  do  violence  to  this  basic  prin- 
ciple which  constitutes,  as  it  were,  the  very  cornerstone  of  the 
whole  system  for  the  administration  of  the  English  national 
finances. 


CHAPTER  XII 
THE  SYSTEM  OF  FINANCIAL  REPORTS 

Finance  Accounts ;  Appropriation  Accounts ;  The  Estimates ;  Lack  of 
Any  General  Report  of  Audited  Receipts  and  Expenditures. 

The  theory  of  legislative  determination  and  control  of  pub- 
lic revenues  and  expenditures,  if  it  is  to  be  effectively  carried 
out,  demands  that  the  legislature,  and  through  it  the  people, 
shall  be  put  in  possession  of  full  and  detailed  information  re- 
garding the  financial  condition  and  operations  of  the  Govern- 
ment. Only  as  it  is  given  this  information,  and  given  it  in 
such  a  form  that  its  significance  can  be  readily  seen,  can  it 
properly  perform  its  function  of  determining  the  financial  and 
work  program  of  the  Government.  In  our  consideration  of 
the  control  of  exchequer  issues,  the  preparation  and  submis- 
sion of  estimates,  and  the  audit  of  accounts,  we  have  inci- 
dentally made  reference  to  certain  reports  and  information 
that  are  laid  before  Parliament.  It  is  now  our  purpose  to  de- 
scribe more  in  detail  the  character  of  these  and  other  docu- 
ments with  a  view  to  presenting  in  one  place  a  statement  of  the 
character  of  the  information  that  is  furnished  Parliament,  and 
upon  which  the  latter  bases  its  action. 

In  considering  this  phase  of  the  English  financial  system,   Two  Sets 
the  first  point  to  be  noted  is  that  Parliament  is  furnished  with   °0 
two  sets  of  figures  purporting  to  show  national  income  and   Parliament 
outgo :    ( i )  Those  showing  exchequer  receipts  and  issues ;  and 
(2)  those  showing  audited  receipts  and  expenditure.    We  will 
consider  in  turn  the  reports  giving  each  of  these  two  classes 
of  data. 

Finance  Accounts.  The  oldest  and  most  used  report  giving 
information  regarding  national  finances  is  the  annual  report 

235 


BRITISH  FINANCIAL  ADMINISTRATION 

entitled  "Finance  Accounts  of  the  United  Kingdom  of  Great 

Britain  and  Ireland  for  the  Financial  Year ended  March 

3  ist  ,"  but  which  in  ordinary  use  is  referred  to  by  the 

short  title  of  "Finance  Accounts."  The  publication  of  this 
report  dates  from  1802.  Nothing  illustrates  more  clearly  the 
old  idea  that  the  function  of  Parliament  in  respect  to  the  ex- 
penditures of  the  Government  ceased  when  it  had  granted  a 
certain  sum  of  money  to  the  Crown  for  the  conduct  of  Gov- 
ernment than  the  fact  that  it  was  not  until  this  date,  that  is, 
the  beginning  of  the  nineteenth  century,  that  the  Crown  was 
even  so  much  as  required  to  submit  an  account  or  report  of  the 
moneys  received  and  expended  by  it.  As  Lord  Welby  points 
out  in  the  Memorandum  from  which  we  have  so  frequently 
quoted : 1 

"Until  1802,  therefore,  Parliament  had  no  information 
of  any  kind  as  to  the  expenditure  of  the  money  which  it 
had  voted,  unless  a  return  for  a  special  object  was  asked 
and  granted.  It  is  true  that  under  the  financial  pressure 
of  the  wars  of  William  and  Anne,  Commissioners  were 
from  time  to  time  appointed  to  examine  the  accounts,  but 
Description  these  Commissons  were  too  often  of  a  party  character; 

their  reports  were  not,  therefore,  trustworthy,  and  wer» 
used  for  party  purposes.  During  the  long  peace  no  de- 
mand arose  for  such  inquiries,  and  though  more  thorough 
examination  into  accounts  was  instituted  by  Commissions 
appointed  after  the  American  and  during  the  French 
War,  and  though  these  Commissions  brought  to  light 
irregularities  and  pointed  out  defects  in  financial  organ- 
isation, they  had  no  continuity,  and  had  none  of  the  ele- 
ments of  an  audit.  ...  It  will  be  seen,  then,  that  from 
the  Revolution  (1688)  until  1802  the  House  of  Commons 
received  no  information  as  to  the  public  expenditure  ex- 
cept that  which  the  Chancellor  of  the  Exchequer  might 
think  fit  to  give  them  in  his  Budget  speech,  and  that  was 
1  Report  of  Select  Committee  on  National  Expenditure,  1902,  p.  228. 

236 


THE  SYSTEM  OF  FINANCIAL  REPORTS 

usually  of  very  meagre  character.  It  may  be  added  that 
from  1802  until  1866  (the  date  of  the  Exchequer  and 
Audit  Act)  the  House  learned  only  the  issues  from  the 
Exchequer.  Thus  it  knew  the  sums  which  had  been  im- 
prested  (advanced)  to  the  Departments  from  the  Ex- 
chequer; it  did  not  know  how  the  Departments  had  ac- 
tually expended  those  imprests." 

This  report,  "Finance  Accounts,"  has  not  changed  its  essen- 
tial character  since  its  first  issue.  It  is  a  summary  statement  of 
Government  income  and  expenditure  from  the  standpoint  of 
Exchequer  receipts  and  issues,  and  of  the  resources  and  liabili- 
ties of  the  Government  at  the  end  of  the  year  to  which  it  re- 
lates. It  consists  of  two  basic  tables,  in  the  form  of  balanced  Two 
statements,  giving  a  grand  recapitulation  of  the  facts  regard-  Tables 
ing  these  two  points,  and  a  series  of  supporting  tables  giving 
the  details  entering  into  the  totals  shown  in  these  tables.  All 
this  information  is  presented  in  an  exceptionally  clear  and  com- 
pact form.  The  whole  report  for  the  year  ended  March  31, 
1914,  made  but  a  small  octavo  pamphlet  of  101  pages. 

One  of  the  great  merits  of  this  report  is  the  promptness 
with  which  it  is  rendered.  Thus  the  report  for  1914  was 
submitted  and  ordered  printed  May  25  following,  or  less  than 
two  months  after  the  close  of  the  year  to  which  it  related.  In 
point  of  fact  the  first  and  most  important  of  the  two  basic 
tables  is  laid  before  Parliament  in  the  form  of  a  special  return 
at  a  still  earlier  date,  that  for  1914  being  submitted  on  April  27, 
less  than  a  month  after  the  closing  of  the  books  for  the  year. 

This  return,  constituting  as  it  does  the  general  summing  up 
of  the  financial  operations  of  the  Treasury  during  the  year, 
is  much  the  most  important  financial  return  that  is  laid  be- 
fore Parliament.  It  is  upon  the  figures  contained  in  it  and 
in  the  Estimates  that  the  Chancellor  of  the  Exchequer  bases 
his  budget  proposals.  As  it  consists  of  but  a  single  table  in 
two  parts  and  occupies  but  two  quarto  pages,  the  return  for 
1914  is  here  reproduced  in  full : 

237 


BRITISH  FINANCIAL  ADMINISTRATION 


YEAR  ENDED 

PART  I. — AN  ACCOUNT  OF  THE  PUBLIC  INCOME  AND  EXPENDITURE  OF  THE 
3iST  MARCH,  1914,  PREPARED  IN  COMPLIANCE  WITH  SECTION 

Income 

£  s.    d. 

Customs 35,45Oi°oo 

Excise 39i59O,ooo 

Estate,  &c.,  Duties 27,359,000 

Stamps  (excluding  Fee,  &c.,  Stamps) 9,966,000 

Land  Tax 700,000 

House  Duty 2,000,000 

2,700,000 

Property  and  Income  Tax  (including  Super  Tax) 41,249,000 

Land  Value  Duties 715,000 

Post  Office 30,800,000 

Crown  Lands  (net) 530,000 

Receipts  from  Suez  Canal  Shares  and  Sundry  Loans i,579(972    9     7 

Miscellaneous 2,303,924  14    5 


TOTAL  INCOME £198,242,897    4  — 


THE  SYSTEM  OF  FINANCIAL  REPORTS 


MARCH,  1914 

UNITED  KINGDOM  OF  GREAT  BRITAIN  AND  IRELAND  IN  THE  YEAR  ENDED  THE 
4  OF  THE  SINKING  FUND  ACT,  1875  (38  &  39  VICT.,  c.  45^ 

Expenditure 


I.  CONSOLIDATED  FUND  SERVICES 
National  Debt  Services: 
Permanent  or  Fixed  Annual  Charge: 
Funded  Debt: 

£  s.    d.  £  s.    d. 

Interest 14,787,108  16    2 

Terminable  Annuities 3,202,026  12     5 

Unfunded  Debt — Interest 1,115,849  18     7 

Management  of  Debt 166,529  19     9 

New  Sinking  Fund 5,228,484  13     I 


24,500,000 

Road  Improvement  Fund 1,394,951 

Payments  to  Local  Taxation  Accounts,  &c 9,734,127  10    6 

Other  Consolidated  Fund  Services: 

Civil  List 470,000 

Annuities  and  Pensions 316,575  13  6 

Salaries  and  Allowances 56,547  2  I 

Courts  of  Justice 533,042  7  3 

Miscellaneous  Services 317,725  4  — 

1,693,890  6  10 

II.  SUPPLY  SERVICES 

Army  and  Ordnance  Factories 28,346,000 

Navy 48,833,000 

Civil  Services 53,901,000 

Customs  and  Excise  and  Inland  Revenue 

Departments 4,483,000 

Post  Office  Services 24,607,000 


160,170,000 

TOTAL  EXPENDITURE 197,492,968  17    4 

Surplus  of  Income  over  Expenditure  in  the  Year  Ended  3ist 

March,  1914 749,928    6    8 

£198,242,897  4    — 


PART  II. — AN  ACCOUNT  OF  THE  BALANCES  OF  PUBLIC  MONEY  REMAINING 
MENTS  (NOT  BEING  INCOME  AND  EXPENDITURE  AS  SHOWN  IN 

THE  BALANCES  IN  THE 

Receipts  £  s.     d,  £  s.     d. 

Balances  in  the  Exchequer  on  the  1st 
April,  1913: 

At  the  Bank  of  England 5,389,135     8    4 

At  the  Bank  of  Ireland 940,024  13     2 

6,329,160     I     6 

Repayment  of  Advances: 

For  purchase  of  Bullion  for  Coinage.. .     1,235,000 

Interest  on  Exchequer  Bonds  issued  un- 
der the  Capital  Expenditure  (Money) 
Act,  1904,  repaid  from  Army  and 
Navy  Votes 121,827 

1,356,827 

Raised  by  creation  of  Debt: 

By  Treasury  Bills  for  Supply 27,500,000 

Under  the  Telegraph  (Money)  Act,  1913: 
By  Terminable  Annuities  charge- 
able on  Post  Office  Vote 90,000 

Under  the  Telephone  Transfer  Act,  1911: 
By  Terminable  Annuities  charge- 
able on  Post  Office  Vote 3,939,249 

Under  the  Post  Office  (London)  Rail- 
way Act,  1913: 

By  Terminable  Annuities  charge- 
able on  Post  Office  Vote 7,000 

Under  the  Land  Registry  (New  Build- 
ings) Act,  1900: 

By  Terminable  Annuities  charge- 
able  on    the   Vote   for   Public 

Buildings,  Great  Britain 10,000 

31,546,249 

Temporary  Advances  on  the  credit  of 
Ways  and  Means: 

By  Treasury  Bills 6,500,000 

By  Other  Advances 3,500,000 

10,000,000 

Cunard  Loan: 

Repayment  on  account  of  Principal 130,000 

Suez  Canal  Drawn  Shares 8,427  18    9 

China  Indemnity 571,606  13     7 

East  Africa  Protectorate  Loan: 

Repayment  on  account  of  Principal  and  Interest.  .  .  2,115 

Surplus  of  Income  over  Expenditure  in  the  Year  ended 

3ist  March,  1914 749,928 

£50,694,314  —    6 

*  The  balance  at  the  Bank  of  England  includes  a  sum  of  £454,000  representing  the  un- 
Section  9  of  the  Finance  Act,  1908,  and  £1,579,000  representing  the  unissued  part  of  the  Old 
Finance  Act,  1911. 

NOTE. — Exchequer  Bonds  for  £380,000  were  issued  in  the  year  to  the  National  Telephone 
Transfer  Act,  1911.  The  transaction  does  not  appear  in  the  above  statement,  as  it  did  not 

Treasury,  isth  April  1914. 

I  hereby  certify,  pursuant  to  the  provisions  of  the  Act  38  &  39  Viet.  c.  45,  s.  4, 

Exchequer  and  Audit  Department, 
20th  April,  1914. 

24O 


IN  THE  EXCHEQUER  ON  THE  IST  APRIL,  1913:  OF  THE  RECEIPTS  AND  PAY- 
PART  I.)  IN  THE  YEAR  ENDED  3151  MARCH,   1914;  AND  OF 
EXCHEQUER  ON  THAT  DAY. 

Payments  £  s.      d.  £  8.     d. 

Issues  to  meet  Capital  Expenditure: 

Under  the  Telegraph  (Money)  Act,  1913         90,000 

Under  the  Telephone  Transfer  Act,  1911     3,939,249 

UnderthePost  Office  (London)Act,i9i3  7,000 

Under  the  Land  Registry  (New  Build- 
ings) Act,  1900 10,000 

4,046,249 

Advances: 

For  purchase  of  Bullion  for  Coinage...     1,025,000 

Interest  on  Exchequer  Bonds  issued  un- 
der the  Capital  Expenditure  (Money) 
Act,  1904,  repayable  from  Army  and 
Navy  Votes 121,827 

1,146,827 

Redemption  of  Unfunded  Debt: 

Treasury  Bills  for  Supply 24,000,000 

Temporary  Advances  on  the  credit  of 
Ways  and  Means  repaid: 

Treasury  Bills 6,500,000 

Other  Advances 3,500,000 

10,000,000 

Old  Sinking  Fund,  1907-8,  issued  under 

Section  9  of  the  Finance  Act,  1908 86,000 

Old  Sinking  Fund,  1910-11: 

Issued  under  the  Finance  Act,  1911 : 

Section  16  (i)  (b) 88,500 

Old  Sinking  Fund,  1912-13,  issued  to  reduce  Debt 180,068  16     2 

Cunard  Loan  Repayments: 

Issued  to  the  National  Debt  Commissioners  under  the 

Cunard  Agreement  (Money)  Act,  1904 130,000 

Suez  Canal  Drawn  Shares: 

Issued  to  reduce  Debt  under  the  Finance  Act,  1898 8,427  18     9 

China  Indemnity: 

Issued  to  reduce  Debt  under  the  Finance  Act,  1906 571,606  13     7 

East  Africa  Protectorate  Loan  Repayments: 

Issued  to  reduce  Debt  under  the  Finance  Act,  19 II 2, 115 

Balances  in  the  Exchequer  on  the  3ist 
March,  1914: 

At  the  Bank  of  England* 9,349,O52     211 

At  the  Bank  of  Ireland 1,085,467     9     i 

10,434,519  12 

£50,694.314      -  6 

issued  part  of  the  Old  Sinking  Fund,  1907-8,  which  was  made  applicable  to  Expenditure  under 
Sinking  Fund,  1910-11,  which  was  made  applicable  to  Expenditure,  under  Section  16  of  the 

Company  in  part  payment  of  the  purchase  money  of  their  undertaking  under  the  Telephone 
involve  any  Exchequer  receipt  or  issue  of  cash. 

JOHN  BRADBURY. 
that  the  foregoing  Accounts  are  correct. 

H.  J.  GIBSON, 

Comptroller  General  of  the  Receipt  and  Issue  of  His 
Majesty's  Exchequer  and  Auditor  General  of  Public 
Accounts. 

241 


BRITISH  FINANCIAL  ADMINISTRATION 

Much  the  most  interesting  feature  of  this  showing  is  the 
distinction  that  is  made  between  "public  income  and  expendi- 
ture" proper,  on  the  one  hand,  and  "receipts  and  payments, 
not  being  income  and  expenditure,"  on  the  other,  and  the  fur- 
ther distinction  in  respect  to  the  first  set  of  figures  between 
expenditures  constituting  a  permanent  charge  upon  the  Con- 
solidated Fund  and  those  that  are  met  by  annual  appropria- 
tions for  the  supply  services.  This  table,  as  has  been  stated, 
is  in  effect  an  advance  statement  of  one  of  the  two  basic  tables 
contained  in  the  Finance  Accounts,  and  consequently  is  sup- 
ported by  the  detail  tables  contained  in  that  report  which  ap- 
pears about  a  month  later. 

The  second  basic  table  of  the  "Finance  Accounts"  report, 
that  showing  the  resources  and  liabilities  of  the  Government  at 
the  end  of  the  year,  is  apparently  not  laid  before  Parliament 
as  a  special  return.  For  it  reference  must  accordingly  be  made 
to  the  "Finance  Accounts"  report  itself.  This  table  is  repro- 
duced in  full  on  page  244. 

It  will  be  noted  that  in  this  table  no  effort  is  made  to  include 
other  than  purely  commercial  assets.  In  other  words,  only 
those  items  are  listed  which  represent  assets  which,  theo- 
retically at  least,  the  Government  can  convert  into  cash.  No 
attempt  is  made  to  include  the  value  of  the  physical  properties 
of  the  Government,  such  as  Crown  lands,  public  buildings, 
navy  and  other  vessels,  materials  and  supplies  on  hand,  etc. 
The  report  includes  other  tables  giving :  "Contingent  and 
nominal  liabilities,"  which  a  note  states  are  ones  which  the 
state  is  not  likely  to  be  called  upon  to  meet ;  "loans  guaranteed 
by  the  British  Government,"  and  "unrepaid  advances  made  to 
Colonial  Governments,  etc.,  from  votes  of  Parliament, 
etc." 

Incidentally  the  table  reproduced  brings  out  certain  informa- 
tion regarding  the  method  pursued  by  England  in  financing 
Government  works  requiring  a  large  capital  expenditure.  This 
is  a  feature  of  the  English  financial  system  that  it  would  be 
of  great  interest  to  examine  in  greater  detail.  To  do  so  would, 

242 


THE  SYSTEM  OF  FINANCIAL  REPORTS 

however,  involve  an  examination  of  so  many  special  statutes 
and  so  large  an  amount  of  descriptive  matter  that  it  is  not 
feasible  to  pursue  the  subject  further  in  the  present  re- 
port. 

Mention  has  been  made  of  the  fact  that  the  "Finance  Ac- 
counts," in  addition  to  presenting  the  general  summary  of  Debt 
assets  and  liabilities  which  we  have  reproduced,  also  gives  a  "" 
series  of  tables  showing  operations  during  the  year  in  relation 
to  the  public  debt.  For  purposes  of  completeness,  mention 
should  here  be  made  of  a  special  return  which  is  annually  sub- 
mitted to  Parliament,  in  which  are  given  the  figures  regarding 
public  debt  operations  during  a  series  of  years.  The  figures 
are  taken  largely,  if  not  wholly,  from  the  "Finance  Accounts" 
reports.  This  return,  the  title  of  which  for  the  1914  return 
is  "National  Debt :  Return  Showing  for  Each  Financial  Year 
commencing  the  ist  April  from  1875  to  1914,  inclusive," 
shows : 

I.  The  total  amount  of  dead  weight  debt  outstanding 
on  the  ist  April;  the  amounts  which  were  made  available 
in  each  year  to  1913-14,  inclusive,  for  reduction  of  Debt; 
distinguishing  the  sum  expressly  provided  for  service  of 
the  Debt,  the  old  Sinking  Fund,  and  Miscellaneous  Re- 
ceipts; the  Gross  Amount  of  Debt  redeemed;  the  amount 
of  Debt  Created;  and  the  Net  Increase  or  Decrease  of 
Debt  in  the  Year. 

II.  A  similar  Statement  in  respect  of  other  Capital  Lia- 
bilities. 

III.  A  similar  Statement  in  respect  of  the  aggregate 
Gross  Liabilities  of  the  State  gives  very  full  information 
regarding  all  transactions  and  changes  which  have  taken 
place  during  the  years  covered  with  respect  to  the  funded 
and  other  liabilities  of  the  Government. 

These  two  special  returns,  that  giving  Exchequer  receipts 
and  issues  and  that  giving  information  regarding  national  debt 

243 


BRITISH  FINANCIAL  ADMINISTRATION 


NATIONAL  DEBT 

Statement  Showing  the  Aggregate  Gross  Capital  Liabilities  of 
the  State,  the  Estimated  Assets,  and  also  the  Exchequer 
Balances  on  3ist  March  1913,  and  3ist  March  1914. 


On  March 
31,  1913 

On  March 
3i,  1914 

Increases  (+) 
or  Decreases  (  —  ) 
in  the  year  ended 
March  31,  1914 

Funded  Debt   

£ 

593,453  857 

£ 
586,717  872 

£ 
~~~6  735  985 

Terminable  Annuities:     Estimated  Capital 
Liability  in  respect  of  

31,519,908 

29,552,219 

—  1,967,689 

Unfunded  Debt  

31,500,000 

33,500,000 

-(-2,000,000 

Total  

656,473,765 

649,770,091 

—  6,703,674 

Other  Capital  Liabilities: 
Under  Telegraph  Acts,  1892  to  1913  

8  423  549 

11,452  240 

+3  028  691 

Under  Telephone  Transfer  Act,  1911.  .  .  . 
Under  Uganda  Railway  Acts,  1896  to  1902 
Under  Public  Offices  (Acquisition  of  Sites) 
Act,  1895,  Session  2     

9,328,563 
3,417,099 

380  091 

9,478,052 
3,196,832 

373,777 

+    149,489 
—    220,267 

—       6  314 

Under  Public  Offices  (Whitehall)  Site  Act, 
1897  

423,592 

415,904 

—        7,688 

Under  Royal  Niger  Company  Act,  1809.  . 
Under  Naval  Works  Acts,  1895  to  1905.  . 
Under  Military  Works  Acts,  1897  to  1903. 
Under  Land  Registry  (New  Buildings)  Act, 
1900  

558,647 
17,045,010 
9,700,177 

200,415 

530,932 
16,354-807 
9,231,962 

205,709 

—      27,715 
—    690,203 
—    468,215 

-f-        5,294 

Under  Pacific  Cable  Act,  1901  

1,792,433 

1,768,661 

—      23,772 

Under  Public  Offices  Site    (Dublin)    Act, 
1903  

201,828 

195,284 

—        6,544 

Under  Public  Buildings  Expenses  Act,  1903 
Under  the  Cunard  Agreement   (Money) 
Act,  1904  

1,393,252 
1,950,000 

1,352,859 
1,820,000 

—      40,393 
—  130,000 

Under  Post  Office  (London)  Railway  Act, 
1913  

7,000 

+        7,000 

Total  

54,814,656 

56,384,019 

+1,569,363 

Total  Gross  Liabilities  

£711,288,421 

706,154,110 

+5,134,311 

Estimated  Assets  : 
Estimated    Market   Value    of    Suez    Canal 

39  oiS  ooo 

34,929,000 

—  4,086,000 

Amount  of  Advance  from  the  Exchequer  un- 
repaid:     Bullion,  etc  

400,000 

190,000 

—   210,000 

Loan  to  the  Government  of  the  East  Africa 
Protectorate  

46,530 

46,044 

—          486 

Contribution  of  Colonies  to  Capital  Expendi- 

1,311  203 

1,294,534 

—      16,669 

Nominal  Value  of  Debenture  Stock  of  the 
Cunard   Steamship   Company   held   as 
security  for  repayment  of  Advances  un- 
der the    Cunard   Agreement    (Money) 
Act,  1904  

1,950,000 

1,820,000 

—    130,000 

Total  Estimated  Assets  

£  42,722,733 

38,279,578 

—4.443,155 

Exchequer  Balances  at  the  Banks  of  England 
and  Ireland  

£    6,329,160 

10,434,519 

+4,105,359 

244 


THE  SYSTEM  OF  FINANCIAL  REPORTS 

operations,  have  been  considered  in  connection  with  the  gen-  Statements 
eral  report  entitled  "Finance  Accounts,"  since  they  are  in  ef-  ^"^^ 
feet  little  more  than  advance  sheets  of  that  report,  though  the  Gazette 
data  are  presented  in  a  form  somewhat  different  from  that 
which  they  have  in  the  report  itself.    In  this  connection  men- 
tion should  also  be  made  of  the  fact  that  current  information 
regarding  Exchequer  receipts  and  issues  is  published  weekly 
in  the  official  organ,  the  London  Gazette,  from  which  it  is 
reproduced  in  other  papers.    The  statement  published  in  this 
way  is  of  a  more  summary  character  than  the  corresponding 
table  in  the  "Finance  Accounts"  and  the  special  return.    The 
figures  are  given  in  a  form  to  show  total  receipts  and  issues 
by  main  categories  from  the  beginning  of  the  fiscal  year  to 
the  date  of  the  statement,  in  comparison  with  the  figures  for 
the  corresponding  period  of  the  previous  year. 

If,  therefore,  we  consider  all  these  statements  and  reports 
together,  the  conclusion  must  be  reached  that  they  get  before 
Parliament  and  the  public  the  most  essential  facts  regarding 
treasury  conditions  and  operations  in  an  exceeding  clear  and 
compact  form  and  with  great  promptness.  In  making  this  A  Summary 
statement,  however,  two  facts  of  great  importance  should  be  Essential 
borne  in  mind.  The  first  is  that  the  figures  here  given  are  of  Fact» 
Exchequer  receipts  and  issues  and  not  of  audited  income  and 
expenditure ;  and,  furthermore,  that  even  from  this  standpoint 
they  do  not  include  all  public  receipts  and  payments,  since  those 
extra  receipts  which  are  granted  to  the  services  producing 
them,  in  the  way  of  appropriations  in  aid,  do  not  pass  through 
the  Exchequer,  and  thus  do  not  appear  upon  either  side  of 
the  Exchequer  account.  The  second  is  that,  for  the  reasons 
pointed  out  in  the  Treasury  Minute  of  April  16,  1885,  which 
has  been  quoted,1  the  figures  do  not  fairly  represent  public  ex- 
penditures according  to  votes  or  classes  of  votes  except  at  the 
dates  when  the  quarterly  and  annual  adjustment  of  issues  has 
been  had. 

It  follows  from  the  foregoing  that  the  figures  contained  in 

1  See  p.  152. 

245 


BRITISH  FINANCIAL  ADMINISTRATION 


A  Defect 
in  the 
Form  of 
Statement 


the  "Finance  Accounts,"  and  the  returns  and  statements  pre- 
pared on  the  same  basis  as  that  publication,  cannot  be  taken 
as  furnishing  either  a  complete  or  an  accurate  statement  of 
public  income  and  expenditure.  Even  were  they  complete,  they 
are  not  of  a  character  to  give  information  regarding  the  de- 
tails of  expenditure.  The  furthest  point  to  which  the  itemiza- 
tion  of  expenditure  is  carried  is  that  of  the  153  votes  and  the 
items  constituting  a  permanent  charge  upon  the  Consolidated 
Fund.  This  statement  is  not  made  in  the  way  of  criticism. 
Parliament  and  the  public  have  need  of  two  kinds  of  informa- 
tion regarding  the  national  finances;  that  showing  in  a  large 
way  the  resources  and  liabilities  of  the  Government  as  a  basis 
upon  which  to  frame  financial  policies  and  a  general  work 
program,  and  that  giving  the  details  of  revenue  and  expendi- 
ture in  order  that  rigid  control  may  be  exercised  over  the  man- 
ner in  which  the  financial  affairs  of  the  Government  are  being 
administered.  If  we  make  exception  of  the  various  defects 
arising  out  of  the  system  of  appropriations  in  aid,  it  may  be 
said  that  the  statements  that  we  have  be'en  considering  meet 
the  requirements  for  information  of  the  first  class.  For  the 
purposes  which  they  are  to  serve  it  is  not  necessary  that  they, 
should  be  absolutely  accurate,  nor  that  they  should  itemize 
the  figures  to  any  great  extent. 

In  one  respect,  however,  the  "Finance  Accounts"  as  a  pub- 
lic document  is,  in  the  opinion  of  the  commission,  open  to 
serious  criticism.  Reference  is  made  to  the  failure  to  include 
in  the  report  tables  giving  the  facts  regarding  treasury  condi- 
tions and  operations  for  a  series  of  years,  such,  for* example, 
as  is  given  in  the  special  return  for  the  national  debt.  It  is 
only  as  figures  for  a  given  year  are  compared  with  the  corre- 
sponding figures  for  a  series  of  years  preceding  that  their  full 
significance  can  be  seen.  The  latter  figures  can,  of  course,  be 
secured  by  consulting  the  "Finance  Accounts"  for  those  years, 
but  members  of  Parliament  and  the  general  public  should  not 
be  put  to  the  necessity  of  making  such  a  search. 

Appropriation  Accounts.  If  we  turn  now  from  the  ques- 

246 


THE  SYSTEM  OF  FINANCIAL  REPORTS 

tion  of  Exchequer  receipts  and  issues  to  that  of  actual  receipts 
and  expenditures,  information  must  be  sought  in  the  reports 
of  the  Comptroller  and  Auditor  General.  Of  these,  far  the, 
most  important  is  the  annual  report  made  by  him  entitled  "Ap- 
propriations Accounts,"  in  which  is  given  his  audited  statement 
of  the  manner  in  which  the  votes  for  the  supply  services  have 
been  expended,  this  expenditure  being  accounted  for  accord- 
ing to  the  subheads  set  forth  in  the  estimates. 

In  form  this  report  consists  of  a  collection  of  statements 
of  account  by  the  accounting  officers  charged  with  the  render- 
ing of  the  accounts  for  the  several  votes,  with  the  certificate 
of  the  Comptroller  and  Auditor  General  attached  and  accom- 
panied by  such  explanations  and  comments  as  the  latter  deems  Analyses 
it  fit  to  make.  Each  vote  is  the  subject  of  a  separate  account, 
and  thus  there  are  as  many  statements  as  there  are  votes.  These 
several  statements  are  bound  in  volumes,  one  for  the  civil  serv-« 
ices  and  the  revenue  departments,  one  for  the  army,  and  one 
for  the  navy. 

The  only  attempt  to  bring  together  the  figures  contained  in 
the  several  accounts  is  represented  by  tables  in  which  the 
facts  are  summarized  by  classes  of  votes  and  by  individual 
votes.  Following  is  a  copy  of  the  table  contained  in  the  "Ap- 
propriation Accounts"  for  1912-1913  for  the  civil  services 
and  revenue  departments,  in  which  the  figures  are  given',  by  Summary 
classes  of  votes.  Other  tables  give  the  same  facts  according 
to  individual  votes.  Tables  are  quoted  on  pages  248  ff. 

The  only  further  attempt  to  analyze  the  figures  showing 
expenditures  so  as  to  bring  out  significant  features  is  repre- 
sented by  a  very  interesting  table  given  at  the  back  of  the  re- 
port, in  which  the  effort  is  made  to  adjust  payments  made  by 
one  service  on  account  of  another  in  such  a  way  as  to  show 
the  gross  and  net  cost  of  each  service.  It  will  be  remembered  Supple- 

,,  ,.  .  .  mentary 

that  the  expenses  ot  the  several  services  are  not  entirely  cov-  Summary 
ered  by  their  respective  votes.     The  best  example  of  this  is 
furnished  by  the  practice  of  having  all  expenditures  for  quar- 
ters, stationery,  etc.,  borne  by  the  votes  for  Public  Works  and 

247. 


BRITISH  FINANCIAL  ADMINISTRATION 


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248 


THE  SYSTEM  OF  FINANCIAL  REPORTS 


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249 


BRITISH  FINANCIAL  ADMINISTRATION 


GROSS  AND  NET  TOTAL  COST  OF  CIVIL  SERVICES  AND  REVENUE  DEPARTMENTS 

IMATELY,  THE  GROSS  AND  NET  COST  OF  EACH  VOTE.      IT  IS  COMPILED 

THE  RESPECTIVE  DEPARTMENTS  (OFFICE  OF  WORKS,  STA 
CURRED,    OR    SERVICES    RENDERED,    ON 


Expenses  Charged  on  Other  Funds  or 

No. 

Class  I 

of 
Votes 

Service 

Finance 
Accounts 
Consoli- 
dated 
Fund 

Vote  4-10 
15  Build- 
ingsiMain- 
tenance, 
Furni- 

Class I 
Vote  ii 
Surveys 

Class  I 
Vote  14 
Rates 

Class  II 
Vote  15 
Cost  of 
Audit 

ture,  etc. 

£. 

£. 

£. 

£. 

£. 

z 

Royal  Palaces  and  Marlbor- 

ough  House  

96 

KJ. 

cfi 

a 

Ip4 

Ig 

3 

Royal   Parks   and   Pleasure 

I.S9I 

IO9 

THE  SYSTEM  OF  FINANCIAL  REPORTS 


FOR  THE  YEAR  ENDED  3ist  MARCH,  1913.  THIS  STATEMENT  SHOWS,  APPROX- 
FROM  THE  FINANCE  ACCOUNTS  AND  FROM  RETURNS  FURNISHED  BY 
TIONERY  OFFICE,  ETC.)  BY  WHOM  EXPENDITURE  is  IN- 
BEHALF    OF    OTHER    DEPARTMENTS. 


Votes 

Add 

Deduct 

Expendi- 

Realised 

Class  II 
Vote  24 
Printing 
and 
Station- 
ery 

Class  III 
Votes  I, 
ii.  IS 
Law  ex- 
penses 

Class  VI 
Vote  i 
Superan- 
nuation 

Revenue 
Vote  3 
Postage, 
Telegraph 
and  Tele- 
phone 

Miscel- 
laneous 
Services 

ture 
(Gross) 
shown  in 
Appro- 
priation 
Account 

Gross 
Total 
Cost 

Appro- 
priation 

.  *° 

Aid  and 
Other 
Receipts 

Net 
Total 
Cost 

£. 

£. 

£. 

£. 

£. 

£. 

£. 

£. 

£. 

64 

3 

66,224 

66,597 

1,425 

65,172 

I2O 

12,810 

13,139 

1,816 

11,323 

678 

3.010 

136,920 

142,308 

11.854 

130,454 

251 


BRITISH  FINANCIAL  ADMINISTRATION 

the  Stationery  Office.  If  the  true  cost  of  maintaining  each 
service  is  to  be  known,  it  is  thus  necessary  to  add  to  the  ex- 
penditures of  each  service  as  borne  by  the  vote  the  expendi- 
tures met  out  of  votes  for  these  and  other  services  and  to  de- 
duct the  expenditures  made  from  its  vote  for  services  other 
than  its  own.  This  has  been  done  in  the  table,  to  which  atten- 
tion has  been  directed.  The  preceding-  representation  of  the 
column  headings  and  the  figures  for  the  first  few  votes  will 
show  the  character  of  the  table  on  pages  250-51. 

In  this  table  it  will  be  seen  that  the  facts  are  given  only  by 

votes.    As  many  votes  cover  a  whole  group  of  services,  that 

for  the  Home  Office,  for  example,  covering  the  Home  Office 

NO  proper,  the  inspection  of  factories,  the  inspection  of  mines, 

Comparison    etc  ?  inadequate  information  is  given  regarding  the  cost  of 

particular  services. 

Finally,  it  should  be  noted  that  no  recapitulation  or  analyses 
are  given  showing  audited  expenditure  for  a  series  of  years, 
nor  are  the  several  summary  tables  in  the  separate  volume  con- 
taining the  appropriation  accounts  brought  together  in  a  con- 
solidated statement  for  all  the  supply  services. 

The  Estimates.  Although  a  full  account  has  been  given  of 
the  character  of  data  contained  in  the  books  of  estimates,  men- 
tion of  these  documents  should  be  made  here  since  they  con- 
stitute one  of  the  means  through  which  information  regarding 
the  finances  of  the  Government  is  laid  before  Parliament.  Ref- 
Comparative  erence  to  the  chapter  in  which  the  form  and  character  of  the 
Estimates  are  considered  will  show  that,  in  addition  to  giving 
the  estimates  proper  in  comparison  with  grants  for  the  current 
year,  each  volume  contains  a  table  in  which  the  estimates  are 
compared  with  grants  for  the  current  year,  expenditures  as 
per  appropriation  accounts  for  the  year  next  preceding,  and 
audited  expenditures  for  each  of  the  eight  years  preceding 
that.  This  comparison  is  by  votes  and  classes  of  votes.  The 
same  criticism  that  has  been  made  of  the  showings  in  the 
"Appropriations  Accounts,"  that  the  comparison  goes  no 

252 


THE  SYSTEM  OF  FINANCIAL  REPORTS 

deeper  than  the  individual  votes  and  thus  does  not  even  reach 
the  several  distinct  services  of  the  Government,  applies 
to  this  table,  and  also  that  no  attempt  is  made  to  bring 
the  figures  contained  in  the  several  books  of  estimates 
into  one  consolidated  statement  covering  all  the  supply  serv- 
ices. 

Lack  of  Any  General  Report  of  Audited  Receipts  and  Ex- 
penditures. If  we  attempt  now  to  consider  at  one  time  all 
the  various  documents  in  the  nature  of  financial  reports  which 
are  laid  before  Parliament,  we  cannot  but  be  struck  with  the 
fact  that  there  exists  no  document  in  which  the  data  contained  No  Con- 
in  the  several  reports  that  we  have  been  considering  have  been  statement 
brought  together  in  a  consolidated  statement.  Surprising  as  it 
may  be,  the  fact  is  that  the  English  Government  makes  no 
general  report  of  the  real  expenditures  of  the  Government.  In 
the  appropriation  accounts  and  in  the  other  reports  of  the 
Comptroller  and  Auditor  General  one  can  follow  in  great  de- 
tail the  expenditures  for  particular  purposes,  but  nowhere  can 
one  find  a  complete  statement  of  the  audited  expenditures  of 
the  Government  as  a  whole.  Furthermore,  due  primarily  to 
the  present  system  of  appropriations  in  aid,  it  is  doubtful 
whether  such  a  statement  can  be  prepared.  The  fact  is  that 
there  seems  to  be  little  demand  in  England  for  detailed  data  Difficulty 
that  will  go  beyond  the  vote,  and  for  expenditures  by  votes  Due  *.°  ^p' 

*  propnations 

the  figures  showing  exchequer  issues  are  deemed  to  be  suf-  in  Aid 
ficiently  accurate  for  all  practicable  purposes.  The  question  of 
having  expenditures  analyzed  by  functions,  objects  of  ex- 
penditure, character  of  expenditure,  etc.,  such  as  was  urged  in 
the  report  of  President  Taft's  Commission  on  Economy  and 
Efficiency  on  "The  Need  for  a  National  Budget,"  never  seems 
to  have  been  raised. 

To  the  commission  the  absence  of  a  general  consolidated 
statement  of  audited  expenditures  of  the  Government  as  a 
whole,  in  which  the  items  are  classified  not  only  by  votes  but 
also  by  individual  services,  and  in  which  are  brought  together 

253 


BRITISH  FINANCIAL  ADMINISTRATION 


Changes 
Necessary 
to  Consol- 
idation 


expenditures  for  the  same  services  or  purposes,  if  met  partly 
from  the  Consolidated  Fund  services  and  partly  from  the 
supply  services — this  absence  constitutes  a  serious  defect  in  the 
British  financial  system.  It  is  one,  moreover,  which  could 
easily  be  remedied  did  Parliament  so  desire.  All  that  would  be 
required  would  be :  ( i )  The  abolition  of  the  system  of  appro- 
priations in  aid;  (2)  the  removal  of  the  inconsistencies  now 
existing  in  the  distribution  of  charges  between  the  Consoli- 
dated Fund  services  and  the  supply  services;  and  (3)  the  re- 
quirement that  the  Comptroller  and  Auditor  General,  in  addi- 
tion to  submitting  his  technical  reports  on  appropriation  and 
other  accounts,  shall  prepare  and  lay  before  Parliament  a  gen- 
eral report  on  the  audited  receipts  and  expenditures  of  the 
Government  as  a  whole.  Such  a  report  would  present  expendi- 
tures primarily  by  organization  units,  but  it  might  be  feasible 
further  to  analyze  the  figures  from  the  functional  and  other 
points  of  view.  This  report,  in  a  word,  would  do  for  the 
real  income  and  expenditure  of  the  Government  what  the 
"Finance  Accounts"  report  does  for  Exchequer  receipts  and 
issues.  Thus  in  the  supporting  tables  of  the  two  basic  tables 
in  "Finance  Accounts"  we  find  the  analyses  of:  Income  ac- 
cording to  sources  from  which  derived ;  expenditures  for  Con- 
solidated Fund  services,  in  sufficient  detail  to  show  individual 
salaries  and  pensions  constituting  a  charge  upon  the  fund; 
expenditures  for  supply  services  itemized  by  vote ;  the  composi- 
tion of  the  public  debt;  other  liabilities  of  the  Government; 
and  realizable  assets  of  the  Government.  Such  information 
and  analyses  for  the  material  in  the  general  report  of  audited 
receipts  and  expenditures  would  be  of  great  practical  value. 


CHAPTER    XIII 
THE    BUDGET 

Financial  Statement  1914-1915,  Showing  Revenues  and  Expenditures 
as  Laid  before  the  House  of  Commons  by  the  Chancellor  of  the 
Exchequer  when  Opening  His  Budget,  May  4,  1914;  Financial 
Statement  1914-1915,  Explaining  the  Proposals  Made  by  the  Chan- 
cellor of  the  Exchequer  in  His  Financial  Statement  on  Monday, 
May  4,  1914;  Budget  Speech  of  the  Chancellor  of  the  Exchequer; 
Lack  of  Any  General,  Comprehensive  Budgetary  Statement. 

It  may  be  thought  remarkable  that  in  a  description  of  the 
financial  administration  of  a  country  which,  above  all  others, 
is  noted  for  its  budget  system,  no  mention  should  be  made  of 
its  budget  until  the  description  is  practically  completed.  That 
this  has  been  the  case  has  been  due  to  the  fact  that  a  budget, 
as  we  have  pointed  out  in  our  analysis  of  the  problem  of  finan- 
cial administration,  is  not  so  much  one  of  the  distinct  opera- 
tions which  have  to  be  performed  in  administering  the  finan- 
cial affairs  of  a  government,  as  the  means  through  which  these 
several  operations  are  correlated  and  brought  under  survey  at 
one  time  to  the  end  that  their  relations  and  bearings  one  upon 
the  other  may  be  made  apparent.  It  follows  from  this  that  it 
is  not  feasible  to  consider  the  nature  and  role  of  a  budget  in 
any  given  system  until  the  character  of  the  several  operations 
which  it  is  the  function  of  a  budget  to  bring  into  adjustment 
is  known. 

Without  attempting  to  define  accurately  the  term  "budget," 
for  it  is  one  which  is  used  with  many  different  meanings,  we 
may  say  that  the  idea  underlying  the  conception  of  a  budgetary, 
as  opposed  to  a  non-budgetary,  system  is  that  in  the  former 
the  effort  is  made,  by  those  who  are  responsible  for  initiating 
financial  measures,  to  consider  both  sides  of  the  national  ac- 

255 


BRITISH  FINANCIAL  ADMINISTRATION 


Distinction 
between 
Budgetary 
and  Non- 
Budgetary 
Plan 


The  Budget 
a  Summary 
Statement 


count  at  one  and  the  same  time,  or  at  least  in  their  relations 
to  each  other,  and  to  place  them  before  the  legislative  branch 
where  appropriations  are  requested,  while,  in  the  latter,  no  such 
attempt  is  made.  It  is  of  the  essence  of  the  budgetary  system 
that  the  fund  raising  and  granting  authority  shall  be  presented 
with  a  balanced  statement  of  estimated  receipts  and  expendi- 
tures to  the  end  that  it  may  see  whether  there  is  a  prospective 
deficit  to  be  provided  for  or  a  surplus  which  may  be  applied  in 
the  way  of  reduction  of  the  national  debt  or  for  some  other 
purpose,  or  avoided  by  remission  of  taxation. 

In  the  preceding  chapters  we  have  pointed  out  and  described 
the  several  documents  through  which  Parliament  is  placed  in 
possession  of  detailed  information  regarding  the  resources  and 
liabilities,  the  receipts  and  expenditures,  and  the  estimated 
needs  of  the  Government  for  the  year  to  come.  It  now  re- 
mains for  us  to  consider  the  means  employed  by  the  Minis- 
try in  bringing  together  the  information  so  imparted  and, 
on  its  basis,  of  formulating  a  financial  program  for  the  year; 
in  other  words,  of  preparing  and  laying  before  Parliament  a 
budget. 

A  study  of  this  feature  of  the  financial  system  of  Great 
Britain  shows  that  use  for  this  purpose  is  made  of  three  sepa- 
rate documents,  the  titles  of  which,  if  we  take  the  year  1914- 
1915  as  an  example,  are  as  follows: 

1.  Financial  Statement  1914-1915:     Statement  of  Reve- 
nues and  Expenditures  as  Laid  before  the  House  by  the  Chan- 
cellor of  the  Exchequer  when  opening  the  Budget,  May  4, 
1914. 

2.  Budget  Speech  of  the  Chancellor  of  the  Exchequer, 
May  4,  1914. 

3.  Financial  Statement  1914-1915  :    Statement  Explaining 
the  Proposals  Made  by  the  Chancellor  of  the  Exchequer  in 
His  Financial  Statement  on  Monday,  May  4,  1914. 
Though  not  so  designated  popularly,  this  statement  constitutes 
in  effect  the  real  budget:  the  other  two  statements  are  but 
explanatory  of  the  financial  program  here  outlined.     Accord- 

256 


THE  BUDGET 

ing  to  the  Memorandum  on  the  English  Financial  System,  pre- 
pared by  the  Treasury,  to  which  allusion  has  several  times  been 
made,  "an  annual  statement,  partaking  of  the  nature  of  a 
budget,  has  been  made  in  the  House  of  Commons  yearly  since 
the  Revolution  (1688)  or  for  over  two  hundred  years.  But 
for  many  years  they  were  not  of  the  complete  and  elaborate 
character  which  now  distinguishes  them;  while  the  fact  that 
for  many  years  speeches  were  not  reported  makes  it  difficult 
to  estimate  the  value  of  them.  The  phrase  mentioned  above 
that  the  Chancellor  of  the  Exchequer  'opens  the  budget'  was 
in  force  soon  after  1750."  1 

The  statement  for  the  year  1914-1915  covers  but  7  pages. 
The  importance  of  this  document  warrants  our  reproducing  it 
in  full,  in  order  that  an  opportunity  may  be  given  to  observe 
its  general  scope  and  to  appreciate  fully  the  character  of  the 
items  which  are  included  in  it. 

Financial  Statement  1914-1915:  Statement  Explaining  the 
Proposals  Made  by  the  Chancellor  of  the  Exchequer  in 
His  Financial  Statement  on  Monday,  May  4,  1914. 
It  will  be  noted  that  in  the  financial  statement  submitted  May  4, 
a  copy  of  which  has  been  reproduced  on  pages  258-264,  the 
Chancellor  of  the  Exchequer  mentions  in  the  table  giving  esti- 
mated revenues  for  1914-1915  certain  items  of  income  to  be 
derived  through  a  modification  of  the  existing  system  of  taxa- 
tion. The  present  statement  has  for  its  purpose  to  give  the 
details  of  the  modification  of  rates  there  proposed  and  the 
manner  in  which  the  increased  burden  of  taxation  will  be  dis- 
tributed among  the  different  classes  of  taxpayers.  The  state- 
ment is  very  brief,  being  but  six  pages,  and  contains  nothing 
in  the  way  of  argument  in  favor  of  the  changes  proposed.  It 
is  difficult  to  see  why  this  elaboration  of  the  figures  given  in 
the  first  statement  was  not  made  a  part  of  that  statement  in- 
stead of  being  issued  as  a  separate  document. 

1  The  word  "budget"  is  derived  from  the  French  word  "bougette" 
a  derivative  of  "bouge,"  a  leather  bag  containing  papers  or  accounts. 

257 


BRITISH  FINANCIAL  ADMINISTRATION 


TABLE  I.    SHOWING  How  THE  AMOUNT  ISSUED  FROM  THE  EXCHEQUER  TO 

MEET  THE  EXPENDITURE  IN  1913-1914  COMPARES  WITH 

THE  ESTIMATED  EXPENDITURE 


1913-14 

Total 
Expenditure 
provided 
for  in  the 
Budget 

Additional 
Expenditure 
for  which 
Supplemen- 
tary Estimates 
were 
presented 

Total 
Estimated 
Expenditure 

Amount 
issued 
to  meet 
Total 
Expenditure 

I.    CONSOLIDATED  FUND  SERVICES 

National  Debt  Services: 
Inside  the  Fixed  Debt  Charge: 
Interest  and  Management.. 
Repayment  of  Capital  

Road  Improvement  Fund.  .  ._  
Payments   to    Local    Taxation    Ac- 
counts, &c  
Other  Consolidated  Fund  Services.  .  . 

Total  Consolidated  Fund  Serv- 
ices   

£. 

16,944,000 
7.556,ooo 

£. 

£. 

16,944,000 
7.556,000 

£. 

16,894,000 
7,606,000 

24,500,000 
1,340,000 

9,665,000 
1,704,000 

24,500,000 
1,340,000 

9,665,000 
1,704,000 

24,500,000 
1.395,  ooo 

9,734,000 
1,694,000 

37,209,000 

37,209,000 

37,323,000 

II.    SUPPLY  SERVICES 

Army  (including    Ordnance    Factor- 
ies)   

28,235,000 
46,309,000 
54,988,000 

4.533,000 
24,366,000 

196,000 

2,500,000 
675,000 

28,431,000 
48,809,000 
55,663,000 

4.533.000 
24,366,000 

28,346,000 
48,833,000 
53,901,000 

4,483,000 
24,607,000 

Navy  

Civil  Services  

Customs  and  Excise  and  Inland  Rev- 
enue   
Post  Office  Services  

Total  Supply  Services  

158,431,000 

3,371,000 

161,802,000 

160,170,000 

Grand  Total  

195,640,000 

3,37I,OOO 

199,011,000 

I97.493,ooo 

In  order  to  show  the  entire  expenditure  for  which  the  State  was  responsible  in  1913-14, 
there  has  to  be  added  the  expenditure  chargeable  to  Capital  Account  as  given  in  the  following 
statement: 

£. 
I.    Expenditure  chargeable  against  Revenue,  as  in  above  table..     197,493,000 


II.     Expenditure  chargeable  against  Capital,  viz.: — 

Telegraph  (Money)  Act,  1913 

Telephone  Transfer  Act,  1911 

Post  Office  (London)  Railway  Act,  1913 

Land  Registry  (New  Buildings)  Act,  1900 


£. 

00,000 
*4,3I9,OOO 
7,000 
10,000 


4,426,000 
Total 201,919,000 


*  Includes  £.709,000  in  payment  of  the  balance  of  the  purchase  money  of  the  National 
Telephone  Company's  undertaking.  Payment  of  £.380,000  of  that  sum  was  made  by  an 
issue  to  the  Company  of  Exchequer  Bonds  of  an  equivalent  amount. 


THE  BUDGET 


TABLE  II.    SHOWING  How  THE  REVENUE  IN  1913-14  COMPARES  WITH  THE 

BUDGET  ESTIMATE  AND  WITH  THE  REVENUE  OF  THE  PREVIOUS 

YEAR,  1912-13 


Receipts  in 
1912-13 

Budget 
Estimate  for 
1913-14 

Receipts  in 
1913-14 

Receipts, 
more  (+) 
or  less  (  —  ) 
than  Budget 
Estimate 

£. 

•j'?  4.85  OOO 

Customs  

£. 
35,200  ooo 

£. 
35  45o  ooo 

£. 
-j-   250  ooo 

38  000,000 

Excise  

38  850  ooo 

•7Q   CQO  OOO 

4"   740  ooo 

25.24.8.000 

Estate,  &c.,  Duties  

26.750.000 

27.^50.000 

4"    609,000 

IO.O5Q.OOO 

Stamps  

9,800,000 

0.066  ooo 

+    166  ooo 

7OO.OOO 

Land  Tax  

700,000 

700  ooo 

2,000,000 

House  Duty  

2,000  ooo 

2  OOO  OOO 

41  2O6,OOO 

Income  Tax  

42  700  ooo 

A"l  Q2Q  OOO 

+i  229  ooo 

•;.6oo,ooo 

Super-Tax  

•*.2  5O.OOO 

3,320,000 

4-       7O.OOO 

4.55.000 

Land  Value  Duties  

7  5O.OOO 

715  ooo 

—        75  OOO 

154,753,000 

Total  Receipts  from  Taxes  £ 

160,000,000 

163,029,000 

+3,029,000 

20,300,000 

Postal  Service  

2I,I25,OOO 

21,190,000 

4-     65.000 

•*.  100,000 

Telegraph  Service  

3.  1  5O.  OOO 

3,080,000 

—     70.000 

5.775.OOO 

Telephone  Service  

6,350  ooo 

6  5^0  ooo 

4-    180,000 

510.000 

Crown  Lands  

530  ooo 

530  ooo 

1,419,000 

2,925,000 

Receipts  from  Suez  Canal  1 
Shares  and  Sundry  Loans  / 

Miscellaneous  

1,370,000 

2,300,000 

1,580,000 

2.^04..  OOO 

4-   210,000 

+          4..OOO 

34,049,000 

Total  Receipts  from  Non- 
Tax  Revenue  

•vt.825.ooo 

15.2I4..OOO 

4-   389,000 

188,802,000 

Totals  £ 

194  825  ooo 

IO8  24.1  OOO 

4-^.4.18.000 

259 


BRITISH  FINANCIAL  ADMINISTRATION 


TABLE  III.    GIVING  THE  EXCHEQUER  BALANCE  SHEET  OF  1913-14 


Receipts 


Payments 


Exchequer    Balance   on 
3ist  March  1913 


£. 


6,329,000 
Revenue 198,243,000 


Repayments  in  excess  of 
Advances. . 


210,000 


Treasury  Bills  issued  in 
lieu  of  those  tempora- 
rily paid  off  in  1912-13  5,000,000 


209,782,000 


£. 


Expenditure 197,493,000 

Treasury  Bills  tempora- 
rily paid  off  in  the  year 
which  are  renewable 
not  later  than  the  3Oth 
June  1914,  under  6 
Edw.  7.C.20.  s.  10  (i)...  1,500,000 


Old  Sinking  Fund  1907-8: 
Issued  under  Section  9 
of  the  Finance  Act, 


1908. 


Old  Sinking  Fund  1910- 
1 1 :  Issued  under  Sec- 
tion 1 6  of  the  Finance 
Act,  1911 

Old  Sinking  Fund  1912- 
13:  Issued  to  reduce 
Debt. . 


86,000 


89,000 


180,000 


Exchequer    Balance    on 

3ist  March  1914 10,434,000 

209,782,000 


THE  BUDGET 


TABLE  IV.    SHOWING  How  THE  ESTIMATED  EXPENDITURE  TO  BE  PROVIDED 

FOR  IN  1914-15  COMPARES  WITH  THE  CORRESPONDING 

ESTIMATED  EXPENDITURE  A  YEAR  AGO 


Service 

1913-14 

I9I4-IS 

Estimate 
for  1914-15, 
more  (+)  or 
less  (—  )  than 
1913-14 

I.     Consolidated  Fund  Services 

National  Debt  Services: 
Inside  the  Fixed  Debt  Charge: 
Interest  and  Management  

£. 

I6.04.4..OOO 

£. 
16,741  ooo 

£. 
—   203  ooo 

Repayment  of  Capital  

7.SS6.OOO 

7.  7  co  OOO 

H-   203  ooo 

24,500,000 

24,500,000 

Road  Improvement  Fund     

1,340  ooo 

1.54.5  OOO 

+   205  ooo 

Payments  to  Local  Taxation  Accounts,  &c 
Other  Consolidated  Fund  Services  

9,665,000 
1.  704.000 

9,885,000 
I,7O6,OOO 

+   220,000 

-j-          2  OOO 

Total  Consolidated  Fund  Services  . 

37,209,000 

37,636,000 

+  427,000 

II.     Supply  Services 
Army  (including  Ordnance  Factories)  
Navy  

28,235,000 

46.^00.000 

28,885,000 
51,550,000 

+   650,000 
+5,241  ooo 

Civil  Services*  

54..  088.  OOO 

57,066  ooo 

+2,078  ooo 

Customs  and  Excise,  and  Inland  Revenue 
Departments  

4,  S^.OOO 

4.606.000 

+    163,000 

Post  Office  Services  

24,366,000 

26,152,000 

+  1,786,000 

Total  Supply  Services  

158,431,000 

168.^4.0.000 

+9,918,000 

Total  

IQ5.64O.OOO 

2os.o8s.ooo 

+IO.'V15.OOO 

t  Estimated      Expenditure      chargeable 
against  Capital  

^.ITS.OOO 

5.  26s.  OOO 

+2,090  ooo 

1913-14 

1914-15 

1913-14 

I9I4-I5 

*  Civil  Services:  — 
Public  Education  
Old  Age  Pensions  
Labour  Exchanges,  In- 

£. 

18,717,000 
12,600,000 

£. 

18,978,000 
12,710,000 

fExpenditure  chargeable 
against  Capital:  — 
Telegraph      (Money) 
Act,  1913  

£. 

£. 
§4,500  ooo 

surance,  &c  

7,499,000 

8,312,000 

Telephone      Transfer 

Other  Civil  Services.  .  . 

16,172,000 

17,066,000 

Act  

$3,  000,000 



54,988,000 

57,066,000 

Railway  Act,  1913 

600  ooo 

Military  Work  Acts  .  . 
Land  Registry  (New 
Buildings)  Act  
Public  Buildings  Ex- 

65,000 
10,000 
100,000 

65,000 

100,000 

3,175,000 

5,265,000 

t  Exclusive  of  the  balance  of  the  purchase  money  of  the  National  Telephone  Company's 
undertaking.  §  Provisional  figure. 

26l 


BRITISH  FINANCIAL  ADMINISTRATION 

TABLE  V.    GIVING  "FINAL  BALANCE  SHEET,"  1914-15, 

Estimated  Revenue,  1014-15 

£. 
Customs 35,35o,ooo 

Excise 39,650,000 

£. 

Estate,  &c.     Duties  as  in  Table  V 28,000,000 

Add: — Proposed  revision  of  duties  (net) 800,000 

. 28,800,000 

Stamps 9,900,000 

Land  Tax 700,000 

House  Duty 2,000,000 

£. 

Income  Tax  as  in  Table  V 45,250,000 

Add: — Proposed  increase  of  2d.  in  the  £  and 

other  alterations  (net) 5,500,000 

50,750,000 

Super  Tax  as  in  Table  V 3,300,000 

Add: — Proposed  alteration  of  scale 2,500,000 

5,800,000 

Land  Value  Duties 725,000 

Total  Receipts  from  Taxes £173,675,000 

Postal  Service 21,750,000 

Telegraph  Service 3,100,000 

Telephone  Service 6,900,000 

Crown  Lands 530,000 

Receipts  from   Suez   Canal   Shares  and  Sundry 
Loans 1,370,000 

Miscellaneous 2,130,000 

Total  Receipts  from  Non-Tax  Revenue ....  £35,780,000 

Total  Revenue £209,455,000 

Borrowings  to  meet  expenditure  chargeable  against  Capital ....  £    5,265,000 

262 


THE  BUDGET 
AS  PROPOSED  BY  THE  CHANCELLOR  OF  THE  EXCHEQUER 


Estimated  Expenditure, 
I.    CONSOLIDATED  FUND  SERVICES 

National  Debt  Services:  £. 

Interest  and  Management 16,741,000 

£. 

Repayment  of  Capital  as  in  Table  IV 7>759,ooo 

Deduct: — Proposed   reduction   of   Sinking 
Fund 1,000,000 

6,759,000 

23,500,000 

Road  Improvement  Fund 1,545,000 

Payments  to  Local  Taxation  Accounts,  &c 9,885,000 

Other  Consolidated  Fund  Services 1,706,000 

Total  Consolidated  Fund  Services £36,636,000 

II.    SUPPLY  SERVICES 

Army  (including  Ordnance  Factories) 28,885,000 

Navy 51,550,000 

£. 

Civil  Services  as  in  Table  IV 57,066,000 

Add: — Insurance 1,000,000 

Education 586,000 

Public  Health  and  Local  Taxation. .         2,432,000 

61,084,000 

Customs  and  Excise,  and  Inland  Revenue  Depart- 
ments, as  in  Table  IV 4,696,000 

Add: — Valuation 80,000 

Collection   of   proposed   additional 

duties 45,ooo 

4,821,000 

Post  Office  Services  as  in  Table  IV 26,152,000 

Add: — Proposed  increase  to  low- wage  em- 
ployees   75.OOO 

26,227,000 

Total  Supply  Services £172,567,000 

Total  Expenditure £209,203,000 

Balance £       252,000 

Total £209,455,000 

Expenditure  chargeable  against  Capital £5,265,000 

263 


BRITISH  FINANCIAL  ADMINISTRATION 


TABLE  VI.    SHOWING  How  THE  ESTIMATED  RECEIPTS  IN  1914-15  FROM 

REVENUE  AND  FROM  BORROWINGS  TO  MEET  CAPITAL  EXPENDITURE 

COMPARE  WITH  THE  CORRESPONDING  RECEIPTS  IN  1913-14 

(On  Basis  of  Existing  Taxation) 


Receipts  in 
1913-14 

Estimate 
for  1914-15, 
on 
basis  of 
existing 
Taxation 

Estimate 
for  1914-15, 
more  (+)  or 

Receipts  in 
1913-14 

Customs  

£. 
35,450,000 

39,590,000 
27,359,000 
9,966,000 
7OO,OOO 
2,OOO,000 
43,929,000 
3,320,000 
715,000 

£. 
35,350,000 

39,650,000 
28,000,000 
9,900,000 
700,000 
2,000,000 
45,250,000 
3,300,000 
725,000 

£. 
—     IOO.OOO 

-f-       6o,OOO 
+    641,000 
—       66.OOO 

Excise  

Estate,  &c.  Duties  

Stamps  

Land  Tax  

House  Duty  

Income  Tax  

+  I,32I,OOO 
—       2O.OOO 
+       IO.OOO 

Super  Tax  

Land  Value  Duties  

Total  Receipts  from  Taxes  £ 

163,029,000 

164,875,000 

+  1,846,000 

Postal  Service  

2I,I9O,OOO 
3,080,000 
6,530,000 
530,000 

1,580,000 
2,304,000 

21,750,000 
3,100,000 
6,900,000 
530,000 

1,370,000 
2,130,000 

+    560,000 
+       20.OOO 
+    370,000 

Telegraph  Service  

Telephone  Service     

Crown  Lands  

Receipts  from   Suez   Canal   Shares   and 
Sundry  Loans  

—     2IO.OOO 
—     174,000 

Miscellaneous  

Total  Receipts  from  Non-Tax  Rev- 
enue    £ 

35,214,000 

35,780,000 

+    566,000 

Total  Revenue  £ 

198,243,000 

200,655,000 

+2,412,000 

Borrowings     to     meet     Expenditure 
chargeable  against  Capital  £ 

*3,7i7,ooo 

5,265,000 

+  1,548,000 

*  Exclusive  of  the  sum  required  to  complete  the  purchase  of  the  National  Telephone  Com- 
pany's undertaking  (See  note  *  on  tableji). 

264 


THE  BUDGET 

/ 

Budget  Speech  of  the  Chancellor  of  the  Exchequer.  We 
have  stated  that  the  Financial  Statement  constitutes  in  effect 
the  budget;  certainly  it  is  the  document  in  which  a  balanced 
statement  of  estimated  receipts  and  expenditures  is  presented 
together  with  an  indication  of  the  financial  proposals  of  the 
ministry.  Oddly  enough,  however,  the  term  "budget"  is  never 
applied  to  this  statement,  but  is  reserved  for  the  speech  which 
the  Chancellor  of  the  Exchequer  makes  in  laying  this  state- 
ment before  the  House.  Thus  the  Memorandum  on  the  Eng- 
lish Financial  System  says: 

"The  English  budget  is  merely  the  speech  of  the  Chan- 
cellor of  the  Exchequer  when,  soon  after  the  close  of  the 
financial  year,  which  is  on  the  3ist  of  March,  he  lays 
before  the  House  of  Commons  the  financial  result  of  the 
year  just  expired,  the  estimates  of  income  and  expendi- 
ture for  the  year  just  commencing,  and  proposals  for  an 
increase  or  diminution  of  taxation,  or  other  changes  in 
financial  administration,  which  the  Government  recom- 
mended to  the  approval  of  Parliament.  This  speech  is 
not  officially  published.  It  is,  in  fact,  only  to  be  found 
in  the  pages  of  'Hansard's  Parliamentary  Debates/  an 
unofficial  publication  which  reports  every  speech  deliv- 
ered in  Parliament.  The  speech  is  necessarily  but  a  sum- 
mary of  the  figures  of  the  year  under  consideration  and 
in  this  it  differs  widely  from  the  Budget  as  generally 
understood  abroad;  viz.,  a  large  volume  giving  in  great 
detail  the  estimated  income  and  expenditure  of  the  year 
to  which  it  applies." 

As  indicated  in  this  quotation  the  speech  by  the  Chancellor 
of  the  Exchequer  is  far  from  a  general  analysis  of  the  financial 
history  of  the  year  just  closed  or  even  a  detailed  consideration 
of  the  expenditure  program  of  the  Government  for  the  year 
to  come.  Indeed,  the  whole  question  of  expenditure,  except 
as  it  may  involve  certain  large  features  of  public  policy,  is 

265 


BRITISH  FINANCIAL  ADMINISTRATION 


English 

Budget 

Deals 

Primarily 

with 

Revenues 


The  Historic 
Background 


almost  wholly  ignored.  In  the  United  States  and  in  Europe 
one  thinks  of  the  budget  primarily  as  a  document  through 
which  a  program  of  expenditures  is  laid  before  the  appro- 
priating authority.  So  much  is  this  the  case  that  the  term 
"budget,"  more  often  than  not,  is  employed  as  synonymous 
with  that  of  estimates  of  expenditures.  Just  the  contrary  is 
the  case  in  England.  There  the  budget  is  the  document  or 
speech  through  which  the  finance  minister  outlines  the  policy 
of  the  Government  in  respect  to  revenues — the  estimates  of 
expenditure  having  already  been  laid  before  Parliament  and 
considered  in  Committee  of  the  Whole.  One  can  not  possibly 
understand  the  significance  of  the  English  budgetary  pro- 
cedure until  he  appreciates  the  fact  that  the  interest  of  Parlia- 
ment and  the  people  centers  on  the  receipt  and  not  on  the 
expenditure  side  of  the  budget.  The  presentation  of  the  Finan- 
cial Statement  and  the  delivery  of  the  budget  speech  of  the 
Chancellor  of  the  Exchequer  are  anxiously  awaited,  and  when 
given  arouse  great  interest,  not  because  they  will  throw  any 
light  upon  the  proposals  of  the  Ministry  in  respect  to  expendi- 
tures, but  because  they  will  reveal  what  changes  are  proposed 
in  the  system  by  which  the  revenues  of  the  Government  are 
obtained.  The  formal  statement  of  the  Chancellor  of  the 
Exchequer  thus  forecasts  the  nature  of  the  revenue  or  finance 
act  rather  than  that  of  the  appropriation  act. 

This  has  been  so  almost  from  time  immemorial.  The 
struggle  of  the  House  to  control  the  public  purse  has  been 
one  to  control  the  power  of  the  Crown  to  impose  taxation» 
rather  than  the  power  to  expend  money.  All  of  its  efforts 
were  directed  to  the  establishment  of  the  principle  that  no 
new  burden  could  be  imposed  upon  the  people  without  its  con- 
sent. As  we  have  pointed  out,  it  was  not  until  comparatively 
recent  times  that  Parliament  concerned  itself  with  the  matter 
of  the  expenditure  of  the  funds,  the  raising  of  which  it  had 
authorized.  This  spirit  prevails  at  the  present  time.  It  is  true 
that  Parliament  formally  appropriates  money  for  meeting  pub- 
lic expenses,  but  this  appropriation  is  made  upon  the  motion 

266 


THE  BUDGET 

of  the  Crown,  according  to  estimates  prepared  by  the  latter, 
under  a  few  general  heads  and  with  large  powers  to  effect 
transfers  from  one  subhead  to  another.  The  House  has  re- 
signed all  right  itself  to  propose  an  expenditure  or  to  increase 
an  item  proposed  by  the  Crown.  Even  its  powers  of  criticism 
have  been  reduced  to  the  minimum  consistent  with  their  exer- 
cise at  all. 

The  expenditure  of  public  moneys  is  thus  treated  as  a  matter 
pertaining  primarily  to  the  Executive.  Practically,  the  legis- 
lature has  confined  its  participation  in  this  important  govern- 
mental act  to  the  requirement  that  it  shall  be  given  full  infor- 
mation regarding  both  what  the  Executive  proposes  to  do  and 
how  these  proposals  have  in  fact  been  carried  out.  Under 
these  conditions  the  interest  of  both  the  House  and  the  people 
in  the  estimates  is  directed  chiefly  to  the  point  whether  the 
estimates  as  a  whole  are  of  such  a  character  as  will  require  the 
imposition  of  additional  taxes  or  permit  of  a  reduction  of 
those  already  in  force. 

In  this  withdrawal  of  the  matter  of  appropriations  so  largely 
from  legislative  determination  we  have  one  explanation  of 
the  fact  of  interest  centering  upon  the  income  side  of  the 
budget.     Another  and  still  more  potent  reason  for  this  phe-  Revenue 
nomenon  consists  in  the  fact  that,  contrary  to  the  practice  pre-  Variable 
vailing  in  the  National  Government  of  the  United  States,  in-  Factor 
come,   and  not  expenditure,   is  the  variable  element  in  the 
budget.    In  the  United  States  the  income  of  the  Government  is 
in  general  fixed  by  permanent  law.    Congress  starts  from  the 
point  that  there  is  a  certain  sum  available  for  expenditure  and 
proceeds  to  determine  how  it  shall  be  spent.     In  England  the 
contrary  is  the  case.     The  Government  first  determines  what 
is  the  total  of  expenditure  that  must  be  provided  for  and 
proceeds  to  regulate  taxation  accordingly. 

Lack  of  a  General  Comprehensive  Budgetary  Statement. 
The  foregoing  is  a  practical  explanation  of  what,  to  the  com- 
mission, seems  to  be  a  serious  defect  in  the  English  budgetary 
system — the  failure  to  bring  together  in  one  coordinated  state- 

267 


BRITISH  FINANCIAL  ADMINISTRATION 


Different 

Elements 

Not 

Brought 

Together 


ment  the  several  reports  and  documents  through  which  Parlia- 
ment is  given  information  regarding  financial  conditions  and 
proposals.  The  finance  accounts  and  the  estimates  are,  it  is 
true,  in  the  nature  of  supporting  documents  to  the  budgetary 
statements  and  speech  of  the  Chancellor  of  the  Exchequer, 
but  they  are  not  made  such  in  form.  When  it  would  be  a 
matter  of  so  little  trouble  to  make  all  of  the  financial  reports 
which  we  have  described  annexes  to  the  budgetary  statement 
and  have  them  all  go  into  Parliament  as  one  consolidated 
statement,  it  is  difficult  to  see  why  it  is  not  done.  In  par- 
ticular it  is  difficult  to  see  why  the  three  statements  relative 
to  the  budget  proposals  proper  are  not  issued  in  one  instead  of 
three  separate  documents.  In  the  same  way  the  Estimates  and 
the  appropriation  accounts,  instead  of  appearing  as  separate 
volumes  for  the  civil  services  and  revenue  departments,  the 
Army,  and  the  Navy,  should  form  in  each  case  a  single  docu- 
ment with  parts  corresponding  to  the  present  division  by 
volumes. 

In  a  way  it  may  almost  be  said  that  England  has  all  the 
elements  of  a  comprehensive  budgetary  statement  with  sup- 
porting documents,  but  has  failed  to  bring  these  elements  to- 
gether. The  work  of  making  such  a  statement  would  be 
largely  a  matter  of  compilation,  though  advantage  should  be 
taken  of  the  opportunity  to  harmonize  inconsistencies  and,  to  a 
greater  extent  than  is  now  done,  to  prepare  comprehensive 
statements  of  receipts  and  expenditures  covering  a  series  of 
years. 


CHAPTER  XIV 
CONCLUSION 

The  chief  reason  for  undertaking  this  inquiry  concerning 
the  system  of  financial  administration  of  Great  Britain  was 
that  a  more  detailed  knowledge  of  a  system  which  is  generally 
held  to  be  one  of  the  most  efficient  that  has  been  devised  by 
any  nation  for  the  management  of  its  national  finances  could 
not  fail  to  prove  of  value  to  the  United  States  in  the  efforts 
now  being  made  to  put  the  administration  of  our  own  public 
finances — national,  state  and  local — upon  a  more  satisfactory 
basis. 

While,  therefore,  it  is  no  part  of  our  purpose  to  consider 
specifically  the  problems  of  financial  reform  now  under 
active  discussion  in  the  United  States,  and  still  less  to  urge 
for  adoption  any  particular  measure  of  reform,  it  is  neverthe- 
less thought  that  a  useful  purpose  would  be  served  by  bringing 
together  in  a  concluding  chapter  the  more  significant  features 
of  the  British  financial  system  as  previously  considered  in  de- 
tail, pointing  out  wherein  these  features  differ  from  American 
practice  and  indicating  the  extent  to  which  they  represent  prin- 
ciples and  procedures  which  should  at  least  be  given  careful 
consideration  in  any  effort  looking  to  the  improvement  of  our 
present  admittedly  ineffective  method  of  locating  and  en- 
forcing responsibility  for  the  manner  in  which  control  over 
the  public  finances  is  exercised. 

The  already  considerable  literature  dealing  with  the  applica- 
tion of  budget  principles  to  American  financial  administration 
is  perhaps  sufficient  reason  for  not  attempting  here  any  gen- 
eral consideration  of  the  budgetary  problem  in  the  United 

269 


BRITISH  FINANCIAL  ADMINISTRATION 

States.  The  valuable  and  comprehensive  contributions  which 
have  recently  been  made  to  this  subject  in  the  reports  of  Presi- 
dent Taft's  Commission  on  Economy  and  Efficiency,  in  the 
publications  of  the  Bureau  of  Municipal  Research  of  New 
York,  and  in  various  papers  published  by  Dr.  F.  A.  Cleveland, 
Chairman  of  the  Commission  and  Director  of  the  Bureau, 
should  be  examined  by  those  who  are  interested  in  the  signifi- 
cance and  possible  applications  of  English  experience  to  Amer- 
ican problems  of  financial  administration.1 

1  "The  Need  for  a  National  Budget,"  Report  of  the  Commission  on 
Economy  and  Efficiency,  1912,  House  Document  No.  854,  62nd  Con- 
gress, 2nd  session,  Washington,  pp.  567. 

The  recommendations  of  the  Commission  concerning  content  of  a 
budget,  its  definition  and  purpose,  and  method  of  introduction ;  part  I, 
historical  and  descriptive  materials  relating  to  present  policies  in  the 
United  States ;  part  II,  the  constitutional  aspects  of  a  national  budget ; 
suggested  forms  of  financial  statements,  estimates  and  accompanying 
data;  part  III,  a  pro  forma  budget  and  supporting  documents  with 
classification,  and  reasons  therefor,  of  expenditures,  appropriations 
and  estimates.  Appendix  material  gives  answers  to  questionnaire  on 
budget  methods  and  procedure  in  38  foreign  countries ;  bibliography, 
etc. ;  also  digest  of  laws  governing  preparation  and  submission  of  esti- 
mates, and  pertaining  to  appropriations  and  allotments,  and  descrip- 
tion of  reports  at  present  submitted  to  Congress  by  governmental  de- 
partments. 

"A  Budget — with  Supporting  Memoranda  and  Reports,"  Message 
of  the  President  submitting  such  for  the  consideration  of  Congress. 
Senate  Document  No.  1113,  62nd  Congress,  3rd  session,  Washington, 

PP-  433- 

The  message  (44  pages)  is  an  interpretation  and  argument  for  "The 
Budget,"  corresponding  roughly  to  the  budget  speech  under  usual  for- 
eign procedure.  The  budget  gives  summaries  of  data  showing  finan- 
cial conditions  and  operating  results,  summary  of  estimates,  summary 
of  proposed  changes  in  law.  Appendices  give  schedules  supporting 
budget  statements;  memorandum  on  organization  of  a  bureau  of 
central  administrative  control;  recommendations  of  departmental 
officers ;  and  summary  of  constructive  recommendations  culled  from 
annual  reports  of  executive  departments. 

"The  Budget  as  a  Means  of  Locating  Responsibility  for  Waste  and 
Inefficiency,"  by  Frederick  A.  Cleveland.  Proceedings  New  York 
Academy  of  Political  Science,  vol.  Ill,  No.  2,  1912,  pp.  16. 

A  discussion  of  what  the  President  is  trying  to  do  by  way  of 
budget-making  for  the  National  Government.  Summarizes  budget 
procedure  recommended  by  President  Taft's  Commission  on  Economy 
and  Efficiency  and  discusses  essential  differences  between  the  present 
and  the  proposed  method. 

Municipal  Research,  monthly  periodical  issued  by  the  Bureau  of 

270 


CONCLUSION 

The  prime  features  of  the  British  system  of  financial  ad- 
ministration may  be  summarized  as  follows: 

i.  The  adoption  of  the  principle  of  a  budget.  This  means 
the  definite  acceptance  of  the  principle  that  all  of  the  financial 
needs  of  the  government  for  the  period  to  be  financed  shall 
be  considered  at  one  and  the  same  time,  according  to  a  well- 
defined  plan  to  the  end  that  the  executive,  the  Parliament, 
and  the  people  shall  all  have  clearly  before  them  the  full  pur- 
port of  the  problem  as  it  affects  the  condition  of  the  treasury, 

Municipal  Research  and  Training  School  for  Public  Service,  261 
Broadway,  New  York. 

Various  issues  discuss  budgets — municipal,  state  and  national,  and 
budgetary  procedure.  See  especially : 

No.  57  (January,  1915),  "Next  Steps  in  the  Development  of  a 
Budget  Procedure  for  the  City  of  Greater  New  York" — a  report  ad- 
dressed to  the  board  of  estimate  and  apportionment,  New  York  City, 
pp.  5-142. 

No.  58  (February,  1915) — "A  State  Budget — Constructive  Pro- 
posals to  Be  Submitted  to  the  State  Constitutional  Convention,"  by 
Frederick  A.  Cleveland,  pp.  147-168;  also  published  in  Proceedings 
New  York  Academy  of  Political  Science,  v,  141-192;  also  memoran- 
dum on  "The  Practical  Side  of  Budget  Procedure"  by  Charles  D. 
Norton,  pp.  169-172,  and  appendix  to  Dr.  Cleveland's  paper  giving 
illustrations  of  budget  summaries  adapted  to  submission  by  the  execu- 
tive to  the  legislative  branch  of  the  Government,  pp.  173-198. 

No.  62  (June,  1915),  "Budget  Systems — a  Discussion  Before  the 
New  York  Constitutional  Convention."  Contains  proposed  constitu- 
tional amendment  to  provide  a  scientific  budget  system  for  the  state 
and  exposition  of  the  amendment  by  former  Senator  John  G.  Saxe 
and  Dr.  Frederick  A.  Cleveland;  also  testimony  before  committees 
of  the  Constitutional  Convention  by  Hon.  John  J.  Fitzgerald,  chair- 
man of  committee  on  appropriations,  House  of  Representatives,  on 
"American  Financial  Methods  from  the  Legislative  Point  of  View" ; 
ex-President  William  H.  Taft  on  "American  Financial  Methods  from 
the  Executive  Point  of  View";  President  Frank  J.  Goodnow,  Johns 
Hopkins  University,  on  "Administration  and  Financial  Methods"; 
President  A.  Lawrence  Lowell,  Harvard  University,  on  "Financial 
Administration  with  Special  Reference  to  English  Experience."  An 
appendix  gives  the  report  of  the  committee  on  finance  of  the  conven- 
tion favoring  an  executive  budget. 

No.  69  (January,  1916),  "Responsible  Government."  A  collection 
of  papers  and  addresses  by  Dr.  Frederick  A.  Cleveland  on:  "Defects 
in  Our  Constitutions";  "Responsible  Leadership — an  Essential  to 
Efficient  Democracy";  "Visible  vs.  Invisible  Government";  "The 
Budget  Idea  in  the  United  States"  (also  published  in  the  Annals  of 
the  American  Academy  of  Political  and  Social  Science,  November, 
1915)  ;  and  a  memorial  addressed  to  the  legislature  of  New  York, 

271 


BRITISH  FINANCIAL  ADMINISTRATION 

present  and  prospective.  This  means  that  Parliament,  before 
taking  final  action,  requires  that  there  shall  be  prepared  and 
presented  to  it  a  series  of  balanced  statements  showing  the 
resources  and  liabilities  of  the  government,  receipts  and  ex- 
penditures in  the  past  and  estimated  receipts  and  expenditures 
for  the  future.  These  data  are  classified  and  exhibited  in 
comparative  statements  so  that  their  significance  for  the  prob- 
lem of  providing  for  the  financial  needs  of  the  future  may  be 
plainly  apparent. 

2.  The  adoption  of  the  principle  that  the  preparation  and 
submission  of  this  definite  financial  plan  or  proposal  with  sup- 
porting details  of  information  devolve  upon  the  executive. 
This  means  that  the  executive  branch  of  the  government  has 
placed  upon  it  the  obligation  of  bringing  before  the  fund- 
raising  and  fund-granting  authority,  in  one  comprehensive 
statement,  a  definite  financial  and  work  program,  which  shall 
include  an  estimate  of  the  cost  of  carrying  on  each  activity 

signed  by  the  trustees  of  the  Bureau  of  Municipal  Research,  together 
with  correspondence  with  the  Governor  of  New  York  concerning  his 
budget  proposal  to  the  legislature  of  1916.  Appendix  contains  draft 
of  proposed  amendment  of  the  legislative  and  executive  laws  of  New 
York  and  a  list  of  bills  introduced  in  1915  calling  for  expenditures 
of  money,  together  with  a  list  of  those  passed  by  one  house  and  sent 
to  the  other  for  concurrence,  and  a  brief  abstract  of  each  bill  re- 
ported. 

No.  70  (February,  1916),  "Budget  Legislation  in  Two  States,"  pp. 
102.  Introduction  on  "The  Measuring  Stick  of  Democracy" ;  part  I 
on  Financial  Legislation  in  New  Jersey;  part  II,  Financial  Legislation 
in  New  York;  with  discussion  of  various  proposals  before  the  legis- 
latures of  1916  in  both  New  York  and  New  Jersey. 

No.  72  (April,  1916),  "The  History  of  Appropriations  in  the  Legis- 
lative Session  of  1916,  New  York  State,"  pp.  134.  A  detailed  study 
of  all  the  financial  proposals  before  the  legislature  of  that  year  and 
what  was  done  with  them,  together  with  copious  quotations  from 
legislative  debates  and  critical  comments  by  Dr.  Burl  E.  Shultz,  who 
followed  these  sessions  at  Albany  and  prepared  the  report  upon  them. 

No.  73  (May,  1916),  "Three  Proposed  Constitutional  Amendments 
for  Control  of  the  Purse,"  pp.  86.  Contains  discussion  of  executive 
vs.  legislative  budget;  alternatives  before  Governor  Whitman  in  New 
York;  the  Maryland  proposed  constitutional  amendment  for  an  ex- 
ecutive budget;  the  proposed  New  York  constitutional  amendments; 
together  with  certain  open  letters  addressed  to  the  legislature  by  the 
New  York  Bureau  of  Municipal  Research. 

272 


CONCLUSION 

and  a  plan  for  raising  the  necessary  funds  for  the  definite  and 
stated  period  to  be  financed. 

3.  The  adoption  of  the  principle  of  control  over  the  ex- 
ecutive through  the  grant  to  Parliament,  and  especially  to  the 
opposition  in  that  body,  of  an  opportunity  to  subject  such  re- 
port of  past  operations  and  of  proposals  for  the  future  to  crit- 
ical examination.     This  means  that  the  executive  shall  be 
placed  where  at  all  times  it  is  compelled  to  answer  all  ques- 
tions,   to    explain   and   defend   before   all   the   members,   in 
committee  of  the  whole,  all  of  its  acts  past  and  proposed, 
while    the   details    of   estimates    are   being   initially    consid- 
ered. 

4.  The  adoption  of  the  principle  that,  while  Parliament 
shall  thus  be  given  full  and  detailed  information  regarding 
financial  transactions,  and  be  afforded  adequate  opportunity 
to  criticize  such  action  and  proposals,  responsibility  not  only 
for  the  proposal  as  initially  submitted,  but  for  every  change 
made  in  it  as  the  result  of  discussion  shall  normally  rest  with 
the  executive.     The  adoption  of  this  principle  is  but  putting 
into  effect  the  more  general  principle  of  responsible  govern- 
ment that  the  executive — the  ministry  in  power,  is  responsi- 
ble for  leadership  both  in  planning  and  in  executing  plans 
having  to  do  with  the  actual  conduct  of  the  financial  and  busi- 
ness affairs  of  government  and  that  the  function  of  Parlia- 
ment is  restricted  to  that  of  seeing  that  this  responsibility  for 
leadership  is  not  shifted  or  confused.     This  principle  is  put 
into  effect  through  the  adoption  by  Parliament  of  rules  of  pro- 
cedure which  expressly  prohibit  all  motions  looking  to  the  in- 
crease  of   proposals    for   expenditures   as   brought    forward 
by  the  executive  and  the  observance  of  conventions  which 
in   effect   restrain   it    from   making   any   change   of   a   ma- 
terial   character    in    the    financial    program    as    formulated 
by  the  executive,  whether ,  in  the  way  of   increases  or  de- 
creases. 

5.     The  no   less   definite   adoption   of   the  principle   that, 
though  the  determining  voice  in  respect  to  the  preparation 

273 


BRITISH  FINANCIAL  ADMINISTRATION 

of  a  plan  for  raising  and  expending  all  revenues  lies  with 
the  executive,  the  latter  must  wait  on  approval  by  Parlia- 
ment, and  after  approval  shall  render  a  rigid  accounting 
to  Parliament  in  respect  to  the  manner  in  which  authoriza- 
tions granted  are  carried  out.  This  is  secured  by  the  estab- 
lishment of  a  system  of  accounting  and  reporting  which 
gives  to  Parliament  and  the  people  full  information  regard- 
ing all  financial  transactions  in  an  exceptionally  clear  and 
detailed  manner. 

6.  The  adoption  of  the  principle  of  a  parliamentary  audit 
of  receipts  and  expenditures  as  a  means  of  exercising  rigid 
scrutiny  over  the  manner  in  which  authorizations  are  car- 
ried   out.      This   is    secured   by   making   provision    for   the 
audit  of  all  accounts  by  a  Comptroller  and  Auditor  General, 
who  is  an  officer  of  Parliament  and  reports  directly  to  it. 
This  officer,  though  appointed  by  the  executive,  enjoys  com- 
plete independence  due  to  the  fact  that  he  has  had  conferred 
upon  him  the  status  of  a  judicial  officer,  that  his  salary  is 
a  direct  charge  upon  the  Consolidated  Fund,  that  he  holds 
office   during  good   behavior  and   that  he   can   be   removed 
from  office  only  in  the  same  manner  as  is  provided  for  the 
removal  from  office  of  judicial  officers. 

7.  The  adoption  of  the  principle  that  the  reports  of  this 
officer  shall  in  fact  be  subjected  to  careful  examination  and 
scrutiny    by    members    of     Parliament.       This     is    secured 
through  the  establishment  of  a  standing  committee  on  pub- 
lic accounts  of  the  House  of   Commons,   the   chairman   of 
which    is   taken    from   the   opposition 1    having    for   its   sole 
function  the  examination  and   report  upon  all  transactions 
regarding  which  any  question  of  propriety  can  be  raised.  This 
committee  has  the  power  to  take  testimony  and  to  bring  be- 
fore  it   all   officers   of   the   government   having   knowledge 
of  the  facts  to  be  inquired  into.     It  furnishes  thus  an  effec- 
tive means  by  which  Parliament,  making  use  of  the  report 

1  In  only  one  year  since  1866  has  Parliament  taken  the  chairman 
of  this  committee  from  the  majority,  and  that  was  the  year  1869. 

274 


CONCLUSION 

made  to  it  by  its  officer,  the  Comptroller  and  Auditor  Gen- 
eral, can  examine  into  all  financial  transactions  of  the  execu- 
tive. 

8.  The  adoption  of  the  principle  that  the  work  of  exer- 
cising an  immediate  and  direct  control  over  the  preparation 
of  estimates  and  expenditure  of  funds  shall  be  performed  by 
a  special  organ  which  shall  in  effect  act  in  this  capacity  as  an 
agent  of  Parliament.    This  organ,  known  as  the  Treasury  De- 
partment, is  in  principle  not  itself  an  operating  department. 
It  is  not  coordinate  with  such  departments,  but  has  a  posi- 
tion superior  to  them,  which  is  well  recognized  and  estab- 
lished. 

9.  The  adoption  of  the  principle  that  in  making  appropria- 
tions a  clear  distinction  shall  be  made  between :     ( i )  Appro- 
priation heads,  (2)  appropriation  subheads,  and  (3)  support- 
ing details.     The  purpose  of  making  these  distinctions  is  that 
of  harmonizing  the  desirability,  on  the  one  hand,  of  prescrib- 
ing in  all  practical  detail  the  purposes  for  which  funds  shall 
be  granted,  and,  on  the  other,  of  permitting  the  maximum 
flexibility  in  the  actual  expenditure  of  funds  that  is  consistent 
with  adequate  control.     This  is  secured  by  providing  that 
the  details  of  expenditures  set  forth  in  the  supporting  tables 
are  incorporated  in  the  Estimates  for  purposes  of  information 
only;  that  the  amounts  carried  by  the  subheads  of  appropria- 
tions shall  be  deemed  to  be  in  the  nature  of  allotments  sub- 
ject to  change  by  the  effecting  of  transfers  of  money  from 
one  subhead  to  another;  and  that  only  the  totals  carried  by 
the  appropriation  heads  or  "votes,"  as  they  are  called,  shall 
be  in  the  nature  of   definite  appropriations  not  subject  to 
change.1     Abuse  of  the  power  to  effect  transfers  from  one 
subhead  to  another  is  abundantly  safeguarded  by  the  pro- 
visions; that  no  transfers  shall  be  made  except  upon  the  ap- 
proval of  the  Treasury;  that  account  of  expenditures  shall 

1  To  this  latter  statement  there  is  the  exception  that  transfers 
between  appropriation  heads  may  be  effected  in  the  case  of  the  Army 
and  Navy  votes. 

275 


BRITISH  FINANCIAL  ADMINISTRATION 

be  kept  according  to  sub-appropriation  heads;  and  that  the 
report  of  expenditures  shall  show  clearly  the  extent  to  which 
this  power  to  make  transfers  has  been  exercised. 

10.  The  adoption  of  the  principle  that  the  expenditure  of 
appropriations  is  not  mandatory.  Under  the  British  system 
appropriations  are  mere  grants  to  the  executive,  and  the  lat- 
ter is  held  responsible  for  the  manner  in  which  this  discretion 
to  make  use  of  funds  is  exercised.  To  ensure  that  the  funds 
granted  will  in  fact  be  only  expended  as  public  needs  require, 
the  principle  is  firmly  established  that  no  funds  shall  be  ex- 
pended except  upon  the  authorization  of  the  Treasury. 

It  is  hardly  necessary  to  point  out  how  radically  this  system 
differs  from  American  practice.  Scarcely  one  of  these  fun- 
damental principles  of  financial  procedure  finds  expression 
in  our  own  system.  The  basic  principle  underlying  the  use  of  a 
budget  as  the  central  instrument  for  correlating  all  of  the 
financial  transactions  of  the  government  so  that  the  whole 
problem  of  financing  the  government  may  be  considered  at 
one  and  the  same  time,  is  hardly  understood  in  this  country, 
much  less  acted  upon.  Though  the  executive  is  called  upon 
to  keep  account  of  receipts  and  expenditures,  to  make  reports 
and  to  submit  estimates,  the  technical  problem  of  having  them 
so  kept  and  submitted  as  to  constitute  a  comprehensive  report 
of  past  transactions  and  a  work  program  for  the  future  has 
not  been  satisfactorily  worked  out.  The  result  is  that  Con- 
gress does  not  get  before  it  a  statement  of  the  financial  and 
work  program  of  the  executive  in  such  a  form  that  it  can 
clearly  see  its  full  purport.  The  fact  that  Congress  does  not 
get  the  information  to  which  it  is  entitled  is  evidenced  by  the 
necessity  that  its  committees,  having  the  consideration  of  ap- 
propriation bills,  is  under  of  holding  elaborate  hearings  for 
the  purpose  of  securing  information  regarding  estimate  pro- 
posals. Most  important  of  all,  Congress,  and  not  the  execu- 
tive, is  deemed  to  be  the  body  that  should  formulate  the  defi- 
nite program  of  receipts  and  expenditures.  The  reports  and 

276 


CONCLUSION 

estimates  that  are  submitted  to  it  are  not  looked  upon  as  an 
executive  program,  but  rather  as  data  to  enable  Congress  to 
perform  its  function  as  a  program-framing  body.  The  audit 
of  accounts,  instead  of  being  made  by  an  officer  of  the  body 
granting  the  funds,  is  made  by  an  officer  of  the  branch  of  the 
government  whose  operations  are  to  be  passed  upon.  Though 
early  provision  was  made  by  the  House  for  committees  on 
expenditures  in  the  executive  departments,  these  committees 
have  never  attempted  to  make  any  thorough  or  systematic  ex- 
amination of  the  financial  transactions  of  the  executive  as  re- 
vealed in  the  audited  accounts.  Congress  thus  has  no  effective 
machinery  for  the  exercise  of  supervision  and  control  over 
the  manner  in  which  the  executive  performs  its  duties  such 
as  is  possessed  by  the  British  Parliament  in  its  Comptroller  and 
Auditor  General  and  its  standing  committee  on  public  ac- 
counts. In  respect  to  the  granting  of  funds,  the  general  prin- 
ciple is  followed  that  all  appropriations  are  morally,  if  not 
legally,  obligatory,  that  they  represent  an  order  given  by  Con- 
gress to  the  executive,  and  that  it  is  the  duty  of  the  latter 
to  act  upon  such  order.  The  result  is  that  the  executive  feels 
called  upon  to  expend  all  the  funds  voted  to  it  whether  it 
deems  such  expenditure  to  be  wise  or  not.  Nothing  approach- 
ing the  British  system  of  securing  flexibility  in  the  expendi- 
ture of  funds  by  distinguishing  between  appropriation  heads 
and  subheads  and  of  permitting  of  transfers  to  be  effected 
between  subheads  is  to  be  found  in  the  American  system. 
Finally,  there  is  totally  lacking  in  the  National  Government 
any  organ  having  the  duty  of  exercising  a  day  to  day  super- 
vision and  control  over  the  financial  transactions  of  the  Gov- 
ernment, such  as  the  British  Government  possesses  in  its  Treas- 
ury Department. 

In  both  the  detailed  description  of  the  British  financial  sys- 
tem and  in  the  foregoing  enumeration  of  its  leading  features 
the  effort  has  been  made  to  do  two  things :  To  make  known 
the  fundamental  principles  upon  which  this  system  rests  and  to 
bring  out  clearly  the  specific  means  employed  in  putting  these 

277 


BRITISH  FINANCIAL  ADMINISTRATION 

principles  into  execution.  The  importance  of  considering  both 
of  these  factors  cannot  be  overemphasized.  In  the  movement 
constantly  gaining  force  for  the  adoption  in  the  United  States 
of  the  budgetary  principle  by  all  public  bodies,  there  has  been 
too  little  appreciation  of  the  administrative  features  of  the 
problem".  There  is  no  more  important  lesson  to  be  deduced 
from  the  foregoing  study  than  that  the  success  with  which  the 
British  system  works  is  in  large  part  due  to  the  effectiveness 
with  which  provision  has  been  made  for  an  administrative 
machinery  and  procedure  devised  for  the  accomplishment  of 
the  end  sought. 

Take  for  example  the  crucial  point  of  the  British  system, 
that  represented  by  the  exercise  by  the  executive  of  the  con- 
trolling voice  in  the  formulation  and  determination  of  the 
financial  and  work  program.  Can  anyone  for  a  moment  sup- 
pose that  Parliament  would  acquiesce  in  any  such  arrange- 
ment were  not  provision  at  the  same  time  made,  in  the  Treas- 
ury Department,  in  the  office  of  the  Comptroller  and  Auditor 
General  and  in  the  standing  committee  on  public  accounts  of 
the  House  of  Commons,  for  organs  superior  in  status  and 
authority  to  those  of  the  operating  or  spending  departments 
proper  through  which  an  effective  supervision  and  control 
over  all  administrative  acts  might  be  maintained  ?  Or,  again, 
is  it  at  all  likely  that  a  scheme  of  appropriation  would  be 
adopted  under  which  definite  appropriations  are  made  only 
under  a  relatively  few  main  heads  and  a  large  liberty  is  per- 
mitted for  the  transfer  of  funds  from  one  subhead  to  another, 
were  not  provision  at  the  same  time  made  that  this  discretion 
in  respect  to  the  expenditure  of  funds  should  be  subject  to 
the  control  of  a  department  whose  function  it  is  to  act  as  the 
general  business  manager  and  agent  of  Parliament  to  see  that 
all  powers  granted  are  properly  exercised? 

The  importance  of  these  considerations  must  be  apparent 
in  all  efforts  looking  to  the  adoption  of  the  budgetary  system 
in  the  United  States.  It  would  be  futile  to  attempt  to  per- 
suade Congress  and  the  state  legislatures  to  surrender  the 

278 


CONCLUSION 

authority  which  they  now  exercise  over  the  appropriation  of 
funds  in  favor  of  an  executive  determination  unless  coupled 
with  this  demand  is  a  proposal  to  set  up  organs  and  a  pro- 
cedure which  will  ensure  a  more  effective  supervision  and 
control  over  the  financial  acts  of  administrative  officers  than 
is  now  secured  by  these  bodies  seeking  to  act  directly.  More- 
over, it  is  almost  certain  that  unless  provision  is  made  in  this 
way  for  the  exercise  of  a  superior  direction,  supervision  and 
control,  that  the  system  of  an  executive  budget,  if  it  did  not 
develop  abuses  equal  to  those  of  the  existing  system,  would 
certainly  fail  to  give  the  results  expected  of  it. 

Another  matter  of  great  importance  is  the  making  of  a 
clear  distinction  between  the  operations  of  formulating  the 
budgetary  program  and  of  acting  upon  such  program.  It  is 
one  thing  to  maintain  that  the  executive  shall  draft  and  lay 
before  the  legislature  a  comprehensive  report  of  financial 
transactions  in  the  past  and  a  program  for  operations  in  the 
future,  and  quite  another  to  hold  that  no  material  change  in 
the  latter  shall  be  made  by  the  body  to  which  it  is  submitted. 
One  can  quite  well  endorse  the  first  without  acquiescing  in 
the  second.  Indeed,  the  need  for  the  submission  by  the  execu- 
tive of  a  proper  statement  of  financial  operations,  past  and 
proposed,  is,  if  possible,  even  greater  under  the  system  of  legis- 
latively determined  appropriations  than  under  one  of  execu- 
tive determination.  As  long  as  the  legislature  exercises  this 
high  power,  it  is  only  proper  that  it  should  insist  that  the 
executive  shall  place  it  in  possession  of  all  the  facts  in  such 
a  form  that  it  can  exercise  this  power  effectively.  The  de- 
mand for  an  executively  formulated  budget  is  thus  in  no  sense 
a  demand  that  the  legislature  abdicate  any  of  the  powers  that 
it  now  has  over  the  appropriation  of  funds.  On  the  contrary, 
it  involves  only  a  demand  that  the  legislature  shall  be  fur- 
nished with  the  means  through  which  its  powers  may  be  more 
effectively  exercised. 

To  recapitulate,  it  would  therefore  seem  highly  desirable  to 
distinguish  clearly  between  the  three  basic  factors  of  the 

279 


BRITISH  FINANCIAL  ADMINISTRATION 

budgetary  problem:  (i)  The  formulation  of  a  budget;  (2) 
action  upon  the  budget,  and  (3)  the  provision  of  organs  and 
a  procedure  through  which  budgetary  control  may  be  secured. 
As  a  matter  of  practical  expediency,  it  would  further  seem 
that  greater  progress  in  the  direction  of  reform  can  be  antici- 
pated if,  for  the  present,  attention  is  concentrated  upon  the 
first  and  last  of  these  three  factors.  To  neither  of  these  can 
the  most  ardent  advocate  of  the  system  of  legislative  deter- 
mination of  appropriations  find  any  objection.  So  great  would 
be  the  improvement  resulting  from  proper  action  in  respect 
to  these  factors  that  they  may  well  be  regarded  as  necessary 
intermediate  steps  before  the  American  public  is  prepared  to 
pass  judgment  on  the  second,  which  can  only  arouse  intense 
opposition  and  thus  might  jeopardize  any  progress  at  all. 
With  the  principle  of  an  executively  formulated  budget  and 
the  principle  of  a  proper  machinery  for  exercising  budgetary 
control  once  firmly  established,  the  basis  will  be  laid  for  a 
change  in  procedure  in  respect  to  the  second — that  having  to 
do  with  action  upon  the  budget — if  such  change  is  then  deemed 
to  be  desirable. 


APPENDICES 


APPENDIX  I 

EXCHEQUER  AND  AUDIT  DEPARTMENTS  ACT,  1 866, 
AND  TREASURY  MINUTE  THEREON 

29  &  30  VICT.  CHAPTER  39 

An  ACT  to  consolidate  the  Duties  of  the  Exchequer  and  Audit 
Departments,  to  regulate  the  Receipt,  Custody,  and  Issue 
of  Public  Moneys,  and  to  provide  for  the  Audit  of  the 
Accounts  thereof.  [28th  June  1866.] 

'WHEREAS  it  is  expedient  to  consolidate  the  powers  and  duties 
'of  the  Comptroller  of  Her  Majesty's  Exchequer  and  of  the 
'Commissioners  for  Auditing  the  Public  Accounts,  and  to  unite 
'in  one  department  the  business  hitherto  conducted  by  the  sepa- 
'rate  establishments  under  them;  and  to  make  other  provi- 
'sions  for  the  more  complete  examination  of  the  public  ac- 
'counts  of  the  United  Kingdom:'  Be  it  therefore  enacted  by 
the  Queen's  most  Excellent  Majesty,  by  and  with  the  advice 
and  consent  of  the  Lords  Spiritual  and  Temporal,  and  Com- 
mons, in  this  present  Parliament  assembled,  and  by  the  author- 
ity of  the  same,  as  follows: 

1.  This  Act  may  be  cited  for  all  purposes  as  the  Exchequer 
and  Audit  Departments  Act,  1866. 

2.  In  this  Act  "the  Treasury"   shall  mean  the  Commis- 
sioners of  Her  Majesty's  Treasury  for  the  time  being,  or  any 
two  or  more  of  them;  "the  Bank  of  England"  shall  mean  the 
Governor  and  Company  of  the  Bank  of  England;  "the  Bank 
of  Ireland"  shall  mean  the  Governor  and  Company  of  the 
Bank  of  Ireland;  "the  National  Debt  Commissioners"  shall 
mean  the  Commissioners  for  the  Reduction  of  the  National 

283 


APPENDIX  I 

Debt;  "principal  accountants"  shall  mean  those  who  receive 
issues  directly  from  the  accounts  of  Her  Majesty's  Exchequer 
at  the  Banks  of  England  and  Ireland  respectively;  "sub- 
accountants"  shall  mean  those  who  receive  advances,  by  way 
of  imprest,  from  principal  accountants,  or  who  receive  fees 
or  other  public  moneys  through  other  channels;  "the  Secre- 
taries of  the  Treasury"  shall  include  the  Assistant  Secretary. 

3.  At  any  time  within  twelve  months  after  the  passing  of 
this  Act  it  shall  be  lawful  for  Her  Majesty,  Her  heirs  and 
successors,  by  letters  patent  under  the  Great  Seal  of  the  United 
Kingdom,  to  nominate  and  appoint  the  person  who  shall  at 
that  time  hold  the  office  of  Comptroller-General  of  the  Re- 
ceipt and  Issue  of  Her  Majesty's  Exchequer,  and  Chairman 
of  the  Commissioners  for  Auditing  the  Public  Accounts,  to 
be    Comptroller-General   of   the  Receipt  and   Issue   of   Her 
Majesty's  Exchequer  and  Auditor-General  of  Public  Accounts, 
in  this  Act  referred  to  as  "Comptroller  and  Auditor-General," 
and  also  to  nominate  and  appoint  one  of  the  persons  who  shall 
at  that  time  hold  the  offices  of  Commissioners  for  Audit- 
ing the  Public  Accounts  to  be  "Assistant  Comptroller  and 
Auditor." 

The  said  Comptroller  and  Auditor-General  and  Assistant 
Comptroller  and  Auditor  shall  hold  their  offices  during  good 
behaviour,  subject,  however,  to  their  removal  therefrom  by 
Her  Majesty,  Her  heirs  and  successors,  on  an  address  from 
the  two  Houses  of  Parliament;  and  they  shall  not  be  capable 
of  holding  their  offices  together  with  any  other  office  to  be 
held  during  pleasure  under  the  Crown  or  under  any  officer 
appointed  by  the  Crown;  nor  shall  they  be  capable,  while 
holding  their  offices,  of  being  elected  or  of  sitting  as  members 
of  the  House  of  Commons;  nor  shall  any  peer  of  Parliament 
be  capable  of  holding  either  of  the  said  offices. 

4.  Her  Majesty  may,  by  such  letters  patent,  grant  to  the 
persons  therein  named  the  following  salaries ;  that  is  to  say, — 

To  the  Comptroller  and  Auditor-General  a  salary  of  two 
thousand   pounds  per   annum,   and   to   the   Assistant 
284 


APPENDIX  I 

Comptroller  and  Auditor  a  salary  of  one  thousand  five 
hundred  pounds  per  annum;  and  such  salaries  shall  be 
charged  upon  and  paid  out  of  the  Consolidated  Fund 
of  the  United  Kingdom  or  the  growing  produce  thereof. 
It  shall  be  lawful  for  Her  Majesty,  Her  heirs  and  suc- 
cessors, by  letters  patent  as  aforesaid,  to  grant  to  any 
person  who  shall  have  executed  the  offices  of  Comptrol- 
ler and  Auditor-General,  or  Assistant  Comptroller  and 
Auditor,  on  his  ceasing  to  hold  such  office,  an  annuity 
or  pension  not  exceeding  one-half  of  the  salary  of  his 
office  to  which  he  shall  have  been  entitled  immediately 
before  he  ceased  to  hold  such  office,  if  he  shall  have 
held  either,  or  one  after  the  other,  of  the  said  offices, 
or  the  office  of  Commissioner  of  Audit  for  a  period 
not  less  than  fifteen  years,  and  two-thirds  of  his  said 
salary  if  he  shall  have  held  either,  or  one  after  the 
other,  of  the  said  offices  for  a  period  not  less  than 
twenty  years :  Provided  always,  that  no  such  annuity 
or  pension  shall  be  granted  to  either  of  the  said 
officers  unless  he  be  sixty  years  of  age  at  the  least,  or 
be  afflicted  with  some  permanent  infirmity  disabling 
him  from  .the  due  execution  of  his  office,  the  same  to 
be  distinctly  recited  in  such  grant:  Provided  also, 
that  nothing  herein  contained  shall  prevent  either  of 
the  said  officers  from  receiving,  in  lieu  of  such  annuity 
or  pension,  if  he  shall  so  elect,  the  amount  of  super- 
annuation allowance  to  which  he  would  have  been 
entitled  in  respect  of  the  full  period  during  which  he 
shall  have  served  in  the  permanent  Civil  Service  of 
the  State  under  the  provisions  of  the  Superannuation 
Act,  1859. 

5.  On  the  appointment  as  aforesaid  of  a  Comptroller  and 
Auditor-General  and  an  Assistant  Comptroller  and  Auditor, 
the  then  existing  letters  patent  of  appointments  of  Comptroller- 
General  of  the  Exchequer  and  of  Commissioners  of  Audit  shall 
be  ipso  facto  revoked,  and  the  present  offices  of  Comptroller- 

285 


APPENDIX  I 

General  of  the  Exchequer  and  Commissioners  of  Audit  shall 
be  abolished,  but  the  person  appointed  to  be  Comptroller  and 
Auditor-General  shall  have  and  perform  all  the  powers  and 
duties  conferred  or  imposed  on  the  Comptroller-General  of 
the  Exchequer  and  the  Commissioners  for  Auditing  the  Public 
Accounts  respectively  by  any  enactments  relative  to  those 
authorities  respectively  as  far  as  the  same  are  not  repealed 
or  altered  by  this  Act  or  any  other  Act  of  the  present  session 
of  Parliament;  and  it  shall,  be  lawful  for  the  Treasury  to 
grant  to  each  of  the  said  Commissioners  of  Audit  whose 
offices  shall  be  abolished  under  the  provisions  of  this  Act, 
and  who  shall  not  be  appointed  to  either  of  the  said  offices 
of  Comptroller  and  Auditor-General  or  Assistant  Comptroller 
and  Auditor,  an  annual  allowance,  by  way  of  compensation, 
not  exceeding  the  sum  charged  on  the  Consolidated  Fund  as 
the  salary  of  such  Commissioners:  Provided  always,  that  any 
Commissioners  who  may  be  in  receipt  of  emoluments  exceed- 
ing the  salary  so  charged  on  the  Consolidated  Fund  shall  be 
entitled  to  receive,  in  addition  to  the  aforesaid  compensation 
allowance,  such  proportion  of  the  said  emoluments  as  the 
Treasury  are  empowered  to  grant  under  the  provisions  of 
the  Superannuation  Act,  1859;  and  such  allowances  shall  be 
charged  upon  and  paid  out  of  the  Consolidated  Fund  of  the 
United  Kingdom  or  the  growing  produce  thereof. 

6.  On  the  death,  resignation,  or  other  vacancy  in  the  office 
of  the  Comptroller  and  Auditor-General,  or  of  the  Assistant 
Comptroller  and  Auditor,  Her  Majesty,  Her  heirs  and  suc- 
cessors,  may   by  letters  patent  as   aforesaid   nominate   and 
appoint  a  successor,  who  shall  have  the  same  powers,  authori- 
ties, and  duties,  and  who  shall  be  paid  the  like  salary  and  the 
like  annuity  or  pension  out  of  the  Consolidated  Fund. 

7.  Anything   which   under   the   authority   of   this   Act   is 
directed  to  be  done  by  the  Comptroller  and  Auditor-General 
may,  in  his  absence,  be  done  by  the  Assistant  Comptroller 
and  Auditor,  except  the  certifying  and  reporting  on  accounts 
for  the  House  of  Commons. 

286 


APPENDIX  I 

8.  The   Treasury   shall    from   time   to   time   appoint   the 
officers,  clerks,  and  other  persons  in  the  Department  of  the 
Comptroller  and  Auditor-General,  and  Her  Majesty  by  Order 
in  Council  may  from  time  to  time  regulate  the  numbers  and 
salaries  of  the  respective  grades  or  classes  into  which  the  said 
officers,  clerks,  and  others  shall  be  divided. 

9.  The  Comptroller  and   Auditor-General  shall  have   full 
power  to  make  from  time  to  time  orders  and  rules  for  the 
conduct  of  the  internal  business  of  his  department,  and  to 
promote,  suspend,  or  remove  any  of  the  officers,  clerks,  ancf 
others  employed  therein;  and  to  prescribe  regulations  and 
forms  for  the  guidance  of  principal  and  of  sub-accountants  in 
making  up  and  rendering  their  periodical  accounts  for  exami- 
nation: Provided  always,  that  all  such  regulations  and  forms 
shall  be  approved  by  the  Treasury  previously  to  the  issue 
thereof. 

10.  The  Commissioners  of  Customs,  the  Commissioners  of 
Inland    Revenue,    and    the    Postmaster-General    shall,    after 
deduction  of  the  payments  for  drawbacks,  bounties  of  the 
nature  of  drawbacks,  repayments,   and  discounts,  cause  the 
gross  revenues  of  their  respective  departments  to  be  paid,  at 
such  times  and  under  such  regulations  as  the  Treasury  may 
from  time  to  time  prescribe,  to  accounts  to  be  intituled  "The 
Account  of  Her  Majesty's  Exchequer"  at  the  Bank  of  Eng- 
land and  at  the  Bank  of  Ireland  respectively,  and  all  other 
public  moneys  payable  to  the  Exchequer  shall  be  paid  to  the 
same  accounts,  and  accounts  of  all  such  payments  shall  be 
rendered  to  the  Comptroller  and  Auditor-General  daily  in  such 
form  as  the  Treasury  may  prescribe:  Provided  always,  that 
this  enactment  shall  not  be  construed  to  prevent  the  collectors 
and  receivers  of  the  said  gross  revenues  and  moneys  from 
cashing,  as  heretofore,  under  the  authority  of  any  Act  or 
regulation,  orders  issued  for  naval,  military,  revenue,  civil, 
or  other  services,  repayable  to  the  Revenue  Departments  out 
of   the  Consolidated   Fund  or  out  of  moneys  provided  by 
Parliament. 

287 


APPENDIX  I 

11.  All  moneys  paid  into  the  Bank  of  England  and  the 
Bank  of  Ireland  on  account  of  the  Exchequer  shall  be  con- 
sidered by  the  Governor  and  Company  of  the  said  banks 
respectively  as  forming  one  general  fund  in  their  books ;  and 
all  orders  directed  by  the  Treasury  to  the  said  banks  for  issues 
out  of  credits  to  be  granted  by  the  Comptroller  and  Auditor- 
General,  as  hereinafter  provided,  for  the  public  service,  shall 
be  satisfied  out  of  such  general  fund;  and  with  a  view  to 
economise  the  public  balances  the  Treasury  shall  restrict  the 
sums  to  be  issued  or  transferred  from  time  to  time  to  the 
credit  of  accounts  of  principal  accountants  at  the  said  banks, 
as  hereinafter  provided,  to  such  total  sums  as  they  may  con- 
sider necessary  for  conducting  the  current  payments  for  the 
public  service  intrusted  to  such  principal  accountants ;  and  the 
said  principal  accountants  may  consider  the  sums  so  trans- 
ferred to  their  accounts  as  constituting  part  of  their  general 
drawing  balance  applicable  to  the  payment  of  all  the  services 
for  which   they   are   accountable;   but   such   sums    shall   be 
carried  in  the  books  of  such  accountants  to  the  credit  of 
the  respective  services  for  which  the  same  may  be  issued, 
as  specified  in  such  orders:  Provided  always,  that  this  enact- 
ment shall  not  be  construed  to  empower  the  Treasury  or  any 
authority  to  direct  the  payment,  by  any  such  principal  ac- 
countant, of  expenditure  not  sanctioned  by  any  Act  whereby 
services  are  or  may  be  charged  on  the  Consolidated  Fund,  or 
by  a  vote  of  the  House  of  Commons,  or  by  an  Act  for  the 
appropriation  of  the  supplies  annually  granted  by  Parliament. 

12.  At  the  close  of  each  of  the  quarters  ending  on  the  thirty- 
first  day  of  March,  the  thirtieth  day  of  June,  the  thirtieth 
day  of  September,  and  the  thirty-first  day  of  December  in 
every  year,   the  Treasury  shall  prepare  an  account  of  the 
income  and  charge  of  the  Consolidated  Fund  in  Great  Britain 
and  in  Ireland  for  such  quarter,  and  the  charges  for  the  public 
debt  due  on  the  fifth  day  of  April,  the  fifth  day  of  July,  the 
tenth  day  of  October,  and  the  fifth  day  of  January,  shall  be 
included  in  the  accounts  of  the  said  charge  for  the  quarters 

288 


APPENDIX  I 

ending  on  the  days  preceding  the  latter  dates ;  and  a  copy  of 
such  account  shall  forthwith  be  transmitted  by  the  Treasury 
to  the  Comptroller  and  Auditor-General;  and  if  it  shall  appear 
by  such  account  that  the  income  of  the  Consolidated  Fund  in 
Great  Britain  or  in  Ireland  for  the  quarter  is  not  sufficient  to 
defray  the  charge  upon  it,  the  Comptroller  and  Auditor- 
General,  if  satisfied  of  the  correctness  of  the  deficiency,  shall 
certify  the  amount  thereof,  to  the  Bank  of  England  or  to  the 
Bank  of  Ireland,  as  the  case  may  be,  and  upon  such  certifi- 
cates the  said  banks  shall  be  authorised  to  make  advances, 
from  time  to  time,  during  the  succeeding  quarter,  on  the 
application  of  the  Treasury,  by  writing,  in  a  form  to  be  from 
time  to  time  determined  by  them,  to  an  amount  not  exceeding 
in  the  aggregate  the  sums  specified  in  such  certificates;  and 
all  such  advances  shall  be  placed  to  the  credit  of  the  Ex- 
chequer accounts  at  the  said  banks,  and  be  available  to  satisfy 
the  orders  for  credits  granted  or  to  be  granted  upon  the  said 
accounts  by  the  Comptroller  and  Auditor-General;  and  the 
principal  and  interest  of  all  such  advances  shall  be  paid  out  of 
the  growing  produce  of  the  Consolidated  Fund  in  the  said  suc- 
ceeding quarter. 

13.  The  Comptroller  and  Auditor-General  shall  grant  to 
the  Treasury  from  time  to  time,  on  their  requisitions  author- 
ising the  same,  if  satisfied  of  the  correctness  thereof,  credits 
on  the  Exchequer  accounts  at  the  Banks  of  England  and 
Ireland,  or  on  the  growing  balances  thereof,  not  exceeding  the 
amount  of  the  charge  in  the  aforesaid  quarterly  account  of 
the  income  and  charge  of  the  Consolidated  Fund  remaining 
unpaid. 

The  Comptroller  and  Auditor-General  shall  also  grant 
from  time  to  time  to  the  Treasury,  on  similar  requisitions, 
supplemental  credits  for  services  payable  under  any  Act  out 
of  the  growing  produce  of  the  Consolidated  Fund,  and  not 
included  in  the  aforesaid  quarterly  account;  and  the  issues 
or  transfers  of  moneys  required  from  time  to  time  by  the 
principal  accountants  to  enable  them  to  make  the  payments 

289 


APPENDIX  I 

intrusted  to  them  shall  be  made  out  of  such  credits  on  orders 
issued  to  the  said  banks,  signed  by  one  of  the  Secretaries  of 
the  Treasury,  or  in  their  absence  by  such  officer  or  officers  as 
the  Treasury  may  from  time  to  time  appoint  to  that  duty, 
and  in  all  such  orders  the  services  for  which  the  issues  may  be 
authorised  shall  be  set  forth. 

A  daily  account  of  all  issues  or  transfers  made  from  the 
Exchequer  accounts,  in  pursuance  of  such  orders,  shall  be 
transmitted  by  the  said  banks  to  the  Comptroller  and  Auditor- 
General. 

14.  When  any  sum  or  sums  of  money  shall  have  been 
granted  to  Her  Majesty  by  a  resolution  of  the  House  of  Com- 
mons, or  by  an  Act  of  Parliament,  to  defray  expenses  for  any 
specified  public  services,  it  shall  be  lawful  for  Her  Majesty 
from  time  to  time,  by  Her  Royal  Order  under  the  Royal  Sign 
Manual,   countersigned   by  the  Treasury,   to  authorise   and 
require  the  Treasury  to  issue,  out  of  the  credits  to  be  granted 
to  them  on  the  Exchequer  accounts  as  hereinafter  provided, 
the  sums  which  may  be  required  from  time  to  time  to  defray 
such  expenses,  not  exceeding  the  amount  of  the  sums  so  voted 
or  granted. 

15.  When  any  ways  and  means  shall  have  been  granted  by 
Parliament  to  make  good  the  supplies  granted  to  Her  Majesty 
by  any  Act  of  Parliament  or  resolution  of  the  House  of  Com- 
mons, the  Comptroller  and  Auditor-General  shall  grant  to 
the  Treasury,  on  their  requisition  authorising  the  same,   a 
credit  or  credits  on  the  Exchequer  accounts  at  the  Bank  of 
England  and  Bank  of  Ireland,  or  on  the  growing  balances 
thereof,  not  exceeding  in  the  whole  the  amount  of  the  ways 
and  means  so  granted.     Out  of  the  credits  so  granted  to  the 
Treasury  issues  shall  be  made  to  principal  accountants  from 
time  to  time  on  orders  issued  to  the  said  banks,  signed  by  one 
of  the  Secretaries  of  the  Treasury,  or  in  their  absence  by  such 
officer  or  officers  as  the  Treasury  may  from  time  to  time 
appoint  to  that  duty;  and  the  services  or  votes  on  account 
of  which  the  issues  may  be  authorised  shall  be  set  forth  in  such 

290 


APPENDIX  I 

orders :  Provided  always,  that  the  issues  for  Army  and  Navy 
services  shall  be  made  under  the  general  heads  of  "Army" 
and  "Navy"  respectively. 

A  daily  account  of  all  issues  made  from  the  Exchequer 
accounts  in  pursuance  of  such  orders  shall  be  transmitted  by 
the  said  banks  to  the  Comptroller  and  Auditor-General. 

1  1 6.  Within  fifteen  days  after  the  expiration  of  the 
quarters  ending  on  the  thirty-first  day  of  March,  the  thirtieth 
day  of  June,  the  thirtieth  day  of  September,  and  the  thirty- 
first  day  of  December  in  every  year,  the  Treasury  shall  prepare 
an  account  of  the  public  income  and  expenditure  of  the  United 
Kingdom,  according  to  the  actual  receipt  and  issue  of  moneys 
on  the  Exchequer  accounts  at  the  Bank  of  England  and  Bank 
of  Ireland  in  the  twelve  months  ending  on  such  quarter  days 
respectively;  and  if  there  shall  appear  by  such  account  to  be 
a  surplus  of  income  above  expenditure,  the  Treasury  shall 
certify  the  same  to  the  National  Debt  Commissioners,  and  one- 
fourth  part  of  such  surplus  shall  be  applicable  to  the  reduction 
of  the  national  debt  as  herein-after  directed;  and  the  National 
Debt  Commissioners  shall  publish  from  time  to  time  in  the 
London  Gazette  the  sum  which  will  be  so  applied  in  the 
ensuing  quarter.  The  Treasury  shall  cause  one-fourth  part 
of  such  surplus  income  to  be  charged  on  the  Consolidated 
Fund  in  the  quarter  succeeding  the  termination  of  such 
account;  and  the  sum  so  charged  shall  be  issued  by  the 
Treasury  from  time  to  time  in  the  next  ensuing  quarter  to 
the  National  Debt  Commissioners,  who  shall  apply  the  same, 
during  the  said  quarter,  in  redeeming  funded  or  unfunded 
debt,  or  in  repaying  to  the  Bank  of  England  or  to  the  Bank 
of  Ireland  any  advances  made  by  them,  under  the  provisions 
of  this  Act,  towards  supplying  the  deficiency  of  the  Consoli- 
dated Fund  during  the  said  quarter ;  and  all  debt  so  redeemed 
shall  be  forthwith  cancelled.  And  a  copy  of  every  account 
prepared  by  the  Treasury  as  aforesaid,  certified  by  the  Comp- 
troller and  Auditor-General,  shall  be  laid  before  the  House  of 
1  Section  16  is  repealed  by  38  &  39  Viet.  c.  45,  s.  6. 

291 


APPENDIX  I 

Commons  within  fifteen  days  after  the  expiration  of  the  said 
quarterly  periods,  if  Parliament  be  then  sitting,  or,  if  not 
sitting,  then  within  one  week  after  Parliament  shall  be  next 
assembled. 

1  17.  All  debts  accruing  due  under  any  contract  or  lease 
now  or  hereafter  entered  into  or  taken  for  the  public  service, 
and  payable  out  of  the  supplies  from  time  to  time  voted  by 
Parliament  to  Her  Majesty  for  the  public  service,  in  any 
department  for  which  the  payments  are  made  by  the 
Paymaster-General,-  shall  be  discharged  and  paid  in  manner 
following;  that  is  to  say,  such  debts  shall  be  payable  on  the 
order  of  the  department,  and  the  payment  thereof  shall  be 
made  by  a  draft  drawn  by  the  Paymaster-General  on  the 
Bank  of  England,  according  to  the  course  and  practice  of  his 
office,  payable  to  the  persons  to  whom  such  debts  may  be 
due,  or  to  their  agents. 

1 8.  The  Treasury  may   from  time  to  time  determine  at 
what  banks  accountants  shall  keep  the  public  moneys  entrusted 
to  them,  and  they  may  also  determine  what  accounts  so  opened 
in  the  names  of  public  officers  or  accountants  in  the  books 
of  the  Bank  of  England,  of  the  Bank  of  Ireland,  or  of  any 
other  bank,   shall   be  deemed   public  accounts;   and   on   the 
death,  resignation,  or  removal  of  any  such  public  officers  or 
accountants   the   balances   remaining  at   the   credit   of   such 
accounts   shall,    upon   the   appointment   of   their   successors, 
unless  otherwise  directed  by  law,  vest  in  and  be  transferred 
to  the  public  accounts  of  such  successors  at  the  said  banks,  and 
shall  not  in  the  event  of  the  death  of  any  such  public  officers 
or  accountants,  constitute  assets  of  the  deceased,  or  be  in  any 
manner  subject  to  the  control  of  their  legal  representatives. 

19.  It  shall  be  lawful  for  the  Treasury,  whenever  they  shall 
consider  it  for  the  advantage  of  the  public  service,  to  direct 
that  the  accounts  of  any  public  officer  or  department,  which 
by  any  Act  or  Acts  are  required  to  be  kept  under  separate 
heads  at  the  Bank  of  England  or  at  the  Bank  of  Ireland,  shall 

1  Section  17  is  repealed  by  52  &  53  Viet.  c.  53,  s.  2. 

292 


APPENDIX  I 

be  consolidated  in  such  manner  as  they  shall  judge  most  con- 
venient for  the  public  service. 

20.  It  shall  be  lawful  for  the  Bank  of  England  and  Bank 
of  Ireland,  at  the  request  of  the  Treasury,  signified  by  one  of 
their  secretaries,  for  the  public  convenience,  to  open  and  keep 
accounts  of  Government  stock  and  annuities   in  the  books 
of  the  said  banks  under  the  official  description  of  any  public 
officer  for  the  time  being  without  naming  him  and  the  divi- 
dends on  such  stock  and  annuities  may  from  time  to  time  be 
received,  and  the  stock  and  annuities,  or  any  part  thereof,  to 
the  credit  of  such  account  may  from  time  to  time  be  trans- 
ferred by  the  officer  for  the  time  being  holding  such  office,  as 
if  such  stock  and  annuities  stood  in  his  own  name;  and  upon 
the  death,  resignation,  or  removal  of  any  such  public  officer, 
the  stock  and  annuities  standing  to  the  credit  of  such  account, 
and  all  dividends  thereon,  including  any  dividends  not  there- 
tofore received,  shall  become  vested  in  his  successor  in  office, 
and  be  receivable  and  transferable  accordingly.    And  any  such 
public  officer  in  whose  official  description  such  Government 
stock  and  annuities  may  be  standing  may,  by  letter  of  attorney, 
authorise  the  Bank  of  England  or  the  Bank  of  Ireland,  or  all 
or  any  of  their  cashiers,  to  sell  and  transfer  all  or  any  part  of 
the  stock  or  annuities  from  time  to  time  standing  in  the  books 
of  the  said  banks  on  such  account,  and  to  receive  the  dividends 
due  and  to  become  due  thereon;  but  no  stock  or  annuities 
shall  be  sold  or  transferred  at  the  said  banks  under  the  author- 
ity of  such  general  letter  of  attorney,  except  upon  an  order 
in  writing,  signed  by  one  of  the  Secretaries  of  the  Treasury, 
directed  to  the  proper  officers  of  the  said  banks. 

Appropriation  Accounts 

21.  The  Treasury  shall  cause  an  account  to  be  prepared 
and  transmitted  to  the  Comptroller  and  Auditor-General  for 
examination  on  or  before  the  thirtieth  day  of  September  in 
every  year,  showing  the  issues  made  from  the  Consolidated 

293 


APPENDIX  I 

Fund  of  Great  Britain  and  Ireland  in  the  financial  year  ended 
on  the  thirty-first  day  of  March  preceding,  for  the  interest 
and  management  of  the  public  funded  and  unfunded  debt, 
for  the  Civil  List,  and  all  other  issues  in  the  financial  year  for 
services  charged  directly  on  the  said  fund;  and  the  Comp- 
troller and  Auditor-General  shall  certify  and  report  upon  the 
same  with  reference  to  the  Acts  of  Parliament  under  the 
authority  of  which  such  issues  may  have  been  directed;  and 
such  accounts  and  reports  shall  be  laid  before  the  House  of 
Commons  by  the  Treasury  on  or  before  the  thirty-first  day  of 
January  in  the  following  year,  if  Parliament  be  then  sitting, 
and  if  not  sitting,  then  within  one  week  after  Parliament  shall 
be  next  assembled. 

22.  On  or  before  the  days  specified  in  the  respective  col- 
umns of  Schedule  (A)  annexed  to  this  Act,  accounts  of  the 
appropriation  of  the  several  supply  grants  comprised  in  the 
Appropriation  Act  of  each  year  shall  be  prepared  by  the 
several  departments,  and  be  transmitted  for  examination  to 
the  Comptroller  and  Auditor-General  and  to  the  Treasury, 
and  when  certified  and  reported  upon  as  herein-after  directed 
they  shall  be  laid  before  the  House  of  Commons;  and  such 
accounts  shall  be  called  the  "Appropriation  Accounts"  of 
the  moneys  expended  for  the  services  to  which  they  may 
respectively  relate;  and  the  Treasury  shall  determine  by 
what  departments  such  accounts  shall  be  prepared  and 
rendered  to  the  Comptroller  and  Auditor-General,  and  the 
Comptroller  and  Auditor-General  shall  certify  and  report 
upon  such  accounts  as  herein-after  directed;  and  the  reports 
thereon  shall  be  signed  by  the  Comptroller  and  Auditor- 
General  :  Provided  always,  and  it  is  the  intention  of  this  Act 
that  the  Treasury  shall  direct  that  the  department  charged 
with  the  expenditure  of  any  vote  under  the  authority  of  the 
Treasury  shall  prepare  the  appropriation  account  thereof: 
Provided  also,  that  the  term  "department,"  when  used  in 
this  Act  in  connexion  with  the  duty  of  preparing  the  said 
appropriation  accounts,  shall  be  construed  as  including  any 

294 


APPENDIX  I 

public  officer  or  officers  to  whom  that  duty  may  be  assigned 
by  the  Treasury. 

23.  A  plan  of  account  books  and  accounts,  adapted  to  the 
requirements  of  each  service  in  order  to  exhibit,  in  a  convenient 
form,  the  whole  of  the  receipts  and  payments  in  respect  of 
each  vote,  shall  be  designed  under  the  superintendence  of  the 
Treasury;   and   Her   Majesty  may   from   time  to   time,   by 
Order  in  Council,  prescribe  the  manner  in  which  each  depart- 
ment of  the  public  service  shall  keep  its  accounts. 

24.  An  appropriation  account  of  supply  grants  shall  ex- 
hibit on  the  charge  side  thereof  the  sum  or  sums  appropriated 
by  Parliament  for  the  service  of  the  financial  year  to  which 
the  account  relates,  and  on  the  discharge  side  thereof  the  sums 
which  may  have  actually  come  in  course  of  payment  within 
the  same  period;  and  no  imprest  or  advance,  of  the  applica- 
tion of  which  an  account  may  not  have  been  rendered  to  and 
allowed  by  the  accounting  department,  shall  be  included  on 
the  discharge  side  thereof. 

25.  The  department  charged  with  the  duty  of  preparing 
the  appropriation  account  of  a  grant  shall,  if  required  so  to 
do  by  the  Comptroller  and  Auditor-General,  transmit  to  him, 
together    with    the    annual    appropriation    account    of    such 
grant,  a  balance-sheet  so  prepared  as  to  show  the  debtor  and 
creditor  balances  in  the  ledgers  of  such  department  on  the 
day  when  the  said  appropriation  account  was  closed,  and  to 
verify  the  balances  appearing  upon  the  annual  appropriation 
account :  Provided  always,  that  the  Comptroller  and  Auditor- 
General  may,  if  he  thinks  fit,   require  the  said  department 
to  transmit  to  him  in  lieu  of  such  balance-sheet  a  certified 
statement    showing   the   actual   disposition   of   the   balances 
appearing   upon   the   annual    appropriation   account   on   the 
last  day  of  the  period  of  such  account. 

26.  Every   appropriation   account   when   rendered   to   the 
Comptroller  and  Auditor-General  shall  be  accompanied  by  an 
explanation  showing  how  the  balance  or  balances  on  the  grant 
or  grants  included  in  the  previous  account  have  been  adjusted, 

295 


APPENDIX  I 

and  shall  also  contain  an  explanatory  statement  of  any  excess 
of  expenditure  over  the  grant  or  grants  included  in  such 
account,  and  such  statement  as  well  as  the  appropriation 
account  shall  be  signed  by  such  department. 

27.  Every   appropriation   account    shall    be    examined    by 
the  Comptroller  and  Auditor-General  on  behalf  of  the  House 
of  Commons;  and  in  the  examination  of  such  accounts  the 
Comptroller  and  Auditor-General  shall  ascertain,  first,  whether 
the  payments  which  the  accounting  department  has  charged 
to  the  grant  are  supported  by  vouchers  or  proofs  of  payments, 
and,  second,  whether  the  money  expended  has  been  applied 
to  the  purpose  or  purposes  for  which  such  grant  was  intended 
to  provide:  Provided  always,  and  it  is  hereby  enacted,  that 
whenever  the  said  Comptroller  and  Auditor-General  shall  be 
required  by  the  Treasury  to  ascertain  whether  the  expenditure 
included  or  to  be  included  in  an  appropriation  account,  or  any 
portion  of  such  expenditure,  is  supported  by  the  authority 
of  the  Treasury,  the  Comptroller  and  Auditor-General  shall 
examine  such  expenditure  with  that  object,  and  shall  report 
to  the  Treasury  any  expenditure  which  may  appear,   upon 
such    examination,    to    have    been    incurred    without    such 
authority;  and  if  the  Treasury  should  not  thereupon  see  fit 
to  sanction  such  unauthorised  expenditure,  it  shall  be  regarded 
as  being  not  properly  chargeable  to  a  Parliamentary  grant, 
and  shall  be  reported  to  the  House  of  Commons  in  the  manner 
hereinafter  provided. 

28.  In  order  that  such  examination  may,  as  far  as  possible, 
proceed  pari  passu  with  the  cash  transactions  of  the  several 
accounting  departments,  the  Comptroller  and  Auditor-General 
shall  have  free  access,  at  all  convenient  times,  to  the  books 
of  account  and  other  documents  relating  to  the  accounts  of 
such  departments,  and  may  require  the  several  departments 
concerned  to  furnish  him  from  time  to  time,  or  at  regular 
periods,  with  accounts  of  the  cash  transactions  of  such  depart- 
ments respectively  up  to  such  times  or  periods. 

29.  In  conducting  the  examination  of  the  vouchers  relating 

296 


APPENDIX  I 

to  the  appropriation  of  the  grants  for  the  several  services 
enumerated  in  Schedule  (B)  to  this  Act  annexed,  the  Comp- 
troller and  Auditor-General,  after  satisfying  himself  that  the 
accounts  bear  evidence  that  the  vouchers  have  been  completely 
checked,  examined,  and  certified  as  correct  in  every  respect, 
and  that  they  have  been  allowed  and  passed  by  the  proper 
departmental  officers,  may  admit  the  same  as  satisfactory 
evidence  of  payment  in  support  of  the  charges  to  which  they 
may  relate:  Provided  always,  that  if  the  Treasury  should 
desire  any  such  vouchers  to  be  examined  by  the  Comptroller 
and  Auditor-General  in  greater  detail,  the  Comptroller  and 
Auditor-General  shall  cause  such  vouchers  to  be  subjected  to 
such  a  detailed  examination  as  the  Treasury  may  think  fit 
to  prescribe. 

30.  In  conducting  the  examination  of  the  vouchers  relating 
to  the  appropriation  of  the  grants  for  any  services  not  enumer- 
ated in  the  aforesaid  schedule,  the  Comptroller  and  Auditor- 
General  shall  test  the  accuracy  of  the  castings  and  computation 
of  the  several   items  of   such  vouchers :    Provided   always, 
that    when    any    vouchers    have    been    certified    to   be    cor- 
rect  by   any    officers    specially   authorised    to   examine   the 
same,  it  shall  be  lawful   for  the  Comptroller  and  Auditor- 
General,    with    the    consent    of    the    Treasury,    to    dispense 
with  a  second  examination  of  the  particular  items  of  such 
vouchers. 

31.  If   during   the   progress   of   the   examination   by   the 
Comptroller  and  Auditor-General  herein-before  directed  any 
objections  should  arise  to  any  item  to  be  introduced  into  the 
appropriation  account  of  any  grant,   such  objections   shall, 
notwithstanding  such  account  shall  not  have  been  rendered 
to  him,  be  immediately  communicated  by  him  to  the  depart- 
ment concerned,  and  if  the  objections  should  not  be  answered 
to  his  satisfaction  by  such  department,  they  shall  be  referred 
by  him  to  the  Treasury,  and  the  Treasury  shall  determine 
in  what  manner  the  items  in  question  shall  be  entered  in  the 
annual  appropriation  account. 

297 


APPENDIX  I 

32.  In  reporting  as  herein-before  directed,  for  the  informa- 
tion of  the  House  of  Commons,  the  result  of  the  examination 
of  the  appropriation  accounts,  the  Comptroller  and  Auditor- 
General  shall  prepare  reports  on  the  appropriation  account 
of  the  Army  and  on  that  of  the  Navy  separately. 

He  shall  prepare  a  report  on  the  appropriation  accounts  of 
the  Departments  of  Customs,  Inland  Revenue,  and  Post  Office. 

He  shall  prepare  a  report  or  reports  on  the  accounts 
relating  to  the  several  grants  included  within  each  of  the 
classes  into  which  the  grants  for  civil  services  are  divided  in 
the  Appropriation  Act. 

In  all  reports  as  aforesaid  he  shall  call  attention  to  every 
case  in  which  it  may  appear  to  him  that  a  grant  has  been 
exceeded,  or  that  money  received  by  a  department  from  other 
sources  than  the  grants  for  the  year  to  which  the  account 
relates  has  not  been  applied  or  accounted  for  according  to  the 
directions  of  Parliament,  or  that  a  sum  charged  against  a 
grant  is  not  supported  by  proof  of  payment,  or  that  a  payment 
so  charged  did  not  occur  within  the  period  of  the  account, 
or  was  for  any  other  reason  not  properly  chargeable  against 
the  grant. 

If  the  Treasury  shall  not,  within  the  time  prescribed  by 
this  Act,  present  to  the  House  of  Commons  any  report  made 
by  the  Comptroller  and  Auditor-General  on  any  of  the  appro- 
priation accounts,  or  on  the  accounts  of  issues  for  Consolidated 
Fund  services,  the  Comptroller  and  Auditor-General  shall 
forthwith  present  such  report. 

Accounts  other  than  Appropriation  Accounts 

33.  Besides  the  appropriation  accounts  of  the  grants  of 
Parliament,  the  Comptroller  and  Auditor-General  shall  exam- 
ine and  audit,  if  required  so  to  do  by  the  Treasury,  and  in 
accordance  with  any  regulations  that  may  be  prescribed  for  his 
guidance  in  that  behalf  by  the  Treasury,  the  following  ac- 
counts: viz.,  the  accounts  of  all  principal  accountants,  the 

298 


APPENDIX  I 

accounts  of  the  receip*  of  revenue  by  the  Departments  of 
Customs,  Inland  Revenue,  and  Post  Office,  the  accounts  of 
every  receiver  of  money  which  is  by  law  payable  into  Her 
Majesty's  Exchequer,  and  any  other  public  accounts  which, 
though  not  relating  directly  to  the  receipt  or  expenditure  of 
imperial  funds,  the  Treasury  may  by  minute  to  be  laid  before 
Parliament  direct. 

34.  The  accounts  which  by  the  last  preceding  section  the 
Treasury  are  empowered  to  subject  to  the  examination  of  the 
Comptroller  and  Auditor-General  shall  be  rendered  to  him 
by  the  departments  or  officers  who  may  be  directed  so  to  do 
by   the   Treasury;   and  the   term   "accountant,"   when   used 
in  this  and  the  following  sections  of  this  Act  with  reference 
to  any  such  accounts,  shall  be  taken  to  mean  the  department 
or  officer  that  may  be  so  required  by  the  Treasury  to  render 
the  same;  and  every  public  officer  into  whose  hands  public 
moneys,  either  in  the  nature  of  revenue  or  fees  of  office,  shall 
be  paid  by  persons  bound  by  law  or  regulation  to  do  so,  or 
by  subordinate  or  other  officers  whose  duty  it  may  be  to  pay 
such  moneys   wholly   or   in  part   into   the   receipt   of   Her 
Majesty's  Exchequer,  or  to  apply  the  same  to  any  public  serv- 
ice, shall,  at  such  times  and  in  such  form  as  the  Treasury  shall 
determine,  render  an  account  of  his  receipts  and  payments  to 
the  Comptroller  and  Auditor-General ;  and  it  shall  be  the  duty 
of  the  Treasury  to  inform  him  of  the  appointment  of  every 
such  officer. 

35.  Accountants    shall    transmit    their    accounts    together 
with  the  authorities  and  vouchers  relating  thereto  to  the  office 
of  the  Comptroller  and  Auditor-General  in  such  form,  and  for 
such  periods,  and  under  such  regulations  as  he  may  from  time 
to   time   prescribe    for   the   guidance   of   such   accountants: 
Provided  always,  that  no  such  regulations  shall  be  obligatory 
on  such  accountants  until  they  shall  have  been  approved  by 
the  Treasury. 

36.  The  Comptroller  and  Auditor-General  shall  examine 
the  several  accounts  transmitted  to  him  with  as  little  delay 

299 


APPENDIX  I 

as  possible,  and  when  the  examination  of  each  account  shall 
be  completed  he*shall  make  up  a  statement  thereof  in  such 
form  as  he  may  deem  fit,  and  if  it  shall  appear  from  the 
statement  so  made  up  of  any  account,  being  an  account 
current,  that  the  balance  thereon  agrees  with  the  accountant's 
balance,  or  if  it  shall  appear  from  any  account  rendered  by 
an  accountant,  as  well  as  from  the  statement  of  such  account 
by  the  Comptroller  and  Auditor-General,  that  the  accountant 
is  "even  and  quit,"  the  Comptroller  and  Auditor-General  is 
hereby  required  to  sign  and  pass  such  statement  of  account 
so  made  up  by  him  as  aforesaid:  Provided  always,  that  in 
all  other  cases  whatever  the  Comptroller  and  Auditor-General, 
having  made  up  the  statement  of  account  as  herein-before 
directed,  shall  transmit  the  same  to  the  Treasury,  who,  having 
considered  such  statement,  shall  return  it  to  him,  with  their 
warrant  attached  thereto,  directing  him  to  sign  and  pass  the 
account,  either  conformably  to  the  statement  thereof,  or  with 
such  alterations  as  the  Treasury  may  deem  just  and  reasonable ; 
and  a  statement  of  the  account  made  up  by  the  Comptroller 
and  Auditor-General  in  accordance  with  such  Treasury 
warrant  shall  then  be  signed  and  passed  by  him:  Provided 
further,  that  a  list  of  all  accounts  which  the  Comptroller  and 
Auditor-General  may  sign  and  pass  (such  list  to  be  so  pre- 
pared as  to  show  thereon  the  charge,  discharge,  and  balance  of 
each  account  respectively)  shall  be  submitted  by  him  to  the 
Treasury  twice  in  every  year,  videlicet,  not  later  than  the 
first  week  of  February  and  the  first  week  of  August. 

37.  It  shall  be  lawful  for  the  Comptroller  and  Auditor- 
General,  in  the  examination  of  any  accounts,  to  admit  and 
allow,  in  cases  where  it  shall  appear  to  him  to  be  reasonable 
and  expedient  for  the  public  service,  vouchers  for  any  moneys 
expressed  therein,   although  such  vouchers  be  not  stamped 
according  to  law. 

38.  As  soon  as  any  account  shall  have  been  signed  and 
passed   by   the   Comptroller   and   Auditor-General,    he   shall 
transmit  to  the  accountant  a  certificate,  in  which  the  total 

300 


APPENDIX  I 

amount  of  the  sums  forming  respectively  the  charge  and 
discharge  of  such  account,  and  the  balance,  if  any,  remaining 
due  to  or  by  such  accountant  shall  be  set  forth;  and  every 
such  certificate  shall  be  signed  by  him,  and  shall  be  valid  and 
effectual  to  discharge  the  accountant  as  the  case  may  be, 
either  wholly  or  from  so  much  of  the  amount  with  which  he 
may  have  been  chargeable  as  he  may  appear  by  such  certificate 
to  be  discharged  from:  Provided  always,  that  when  any 
account,  not  being  an  account  current,  has  been  signed  and 
passed  by  the  Comptroller  and  Auditor-General  with  a  balance 
due  thereon  to  the  Crown,  he  shall  not  make  out  or  grant  any 
such  certificate  as  aforesaid  until  the  accountant  has  satisfied 
him  either  that  he  has  discharged  the  full  amount  of  such 
balance,  and  any  interest  that  may  as  herein-after  provided 
be  payable  thereon,  or  that  he  has  been  relieved  from  the 
payment  thereof,  or  of  so  much  thereof  as  has  not  been  paid, 
by  a  warrant  from  the  Treasury. 

39.  No  declaration  shall  be  made  by  the  Comptroller  and 
Auditor-General  before  the  Chancellor  of  the  Exchequer  in 
relation  to  any  account  or  any  state  or  statement  thereof; 
nor  shall  any  such  state  or  statement  be  enrolled  as  of  record 
in  the  office  of  Her  Majesty's  Remembrancer  of  the  Court  of 
Exchequer,  any  law,  usage,  or  custom  to  the  contrary  not- 
withstanding; but  every  statement  of  an  account  made  out, 
signed,  and  passed  as  aforesaid,  shall  be  recorded  in  the  office 
of  the  Comptroller  and  Auditor-General,  and  the  recording  of 
such  statement  of  account  in  his  office  shall  be  as  valid  and 
effectual  for  enabling  any  process  in  the  law  against  the 
party  chargeable,  and  any  other  proceeding  for  the  recovery 
of  any  balances  and  any  interest  thereon,  and  for  all  other 
purposes,  as  the  enrolment  of  a  declared  account  in  the  office 
of  Her  Majesty's  Remembrancer  would  have  been  if  this  Act 
had  not  been  passed;  and  a  copy,  certified  under  the  hands 
of  the  Comptroller  and  Auditor-General,  of  the  record  of  any 
such  statement  of  account,  shall  be  taken  notice  of  and  pro- 
ceeded upon  in  the  like  manner  as  the  record  of  any  such 

301 


APPENDIX  I 

declared  account,  enrolled  as  aforesaid,  might  have  been  if 
this  Act  had  not  been  passed. 

40.  In  all  cases  where  the  Comptroller  and  Auditor-General 
shall  be  required  by  the  Treasury  to  examine  and  audit  the 
accounts  of  the  receipt,  expenditure,  sale,  transfer,  or  delivery 
of   any  securities,   stamps,   Government   stock   or  annuities, 
provisions,  or  stores,  the  property  of  Her  Majesty,  he  shall, 
on  the  examination  of  such  accounts  being  completed,  transmit 
a  statement  thereof,  or  a  report  thereon,  to  the  Treasury,  who 
shall,  if  they  think  fit,  signify  their  approval  of  such  accounts 
to  him,  and  he  shall  thereupon  transmit  to  the  accountant 
a  certificate  in  a  form  to  be  from  time  to  time  determined  by 
the  Comptroller  and  Auditor-General,  which  shall  be  to  such 
accountant  a  valid  and  effectual  discharge  from  so  much  as 
he  may  thereby  appear  to  be  discharged  from. 

41.  Every    accountant    shall,    on    the   termination    of    his 
charge  as  such  accountant,  or  in  case  of  a  deceased  accountant 
his  representatives,  shall  forthwith  pay  over  any  balance  of 
public  money  then  due  to  the  public  in  respect  of  such  charge 
to  the  public  officer  authorised  to  receive  the  same;  and  in 
all  cases  in  which  it  shall  appear  to  the  Comptroller  and 
Auditor-General  that  balances   of  public  money  have  been 
improperly  and  unnecessarily  retained  by  an  accountant,  he 
shall  report  the  circumstances  of  such  cases  to  the  Treasury; 
and  the  Treasury  shall  take  such  measures  as  to  them  may 
seem  expedient  for  recovering  by  legal  process,  or  by  other 
lawful  ways  and  means,  the  amount  of  such  balance  or  bal- 
ances, together  with  interest  thereon,  upon  the  whole  or  part 
of  such  balance  or  balances,  for  such  period  of  time  and  at 
such  rate,  not  exceeding  five  pounds  per  centum  per  annum, 
as  to  the  Treasury  may  appear  just  and  reasonable. 

42.  In  all  cases  where  any  estate  belonging  to  a  public 
accountant  shall  be  sold  under  any  writ  of  extent  or  any 
decree  or  order  of  the  Courts  of  Chancery  or  Exchequer,  and 
the  purchaser  thereof  or  of  any  part  thereof  shall  have  paid 
his  purchase  money  into  the  hands  of  any  public  accountant 

302 


APPENDIX  I 

authorised  to  receive  the  same,  such  purchaser  shall  be  wholly 
exonerated  and  discharged  from  all  further  claims  of  Her 
Majesty  for  or  in  respect  of  any  debt  arising  upon  the  account 
of  such  accountant,  although  the  purchase  money  so  paid  be  not 
sufficient  in  amount  to  discharge  the  whole  of  the  said  debt. 

43.  In  all  cases  in  which  an  accountant  may  be  dissatisfied 
with  any  disallowance  or  charge  in  his  accounts  made  by  the 
Comptroller  and  Auditor-General  such  accountant  shall  have 
a  right  of  appeal  to  the  Treasury,  who,  after  such  further 
investigation  as  they  may  consider  equitable,   whether   by 
viva,  voce  examination  or  otherwise,  may  make  such  order 
directing  the  relief  of  the  appellant  wholly  or  in  part  from  the 
disallowance  or  charge  in  question,  as  shall  appear  to  them 
to  be  just  and  reasonable,  and  the  Comptroller  and  Auditor- 
General  shall  govern  himself  accordingly. 

44.  It  shall  be  lawful  for  the  Treasury,  from  time  to  time, 
if  they  see  fit  so  to  do,  to  dispense  with  the  transmission,  to 
the  Comptroller  and  Auditor-General,  of  any  accounts  not 
being   accounts    of    the    receipt   and   expenditure    of   public 
money,  and  with  the  audit  of  such  accounts  by  him,  any  law, 
usage,  or  custom  to  the  contrary  notwithstanding:  Provided 
always,  that  copies  of  any  Treasury  Minutes  dispensing  with 
the  audit  of  such  accounts  shall  be  laid  before  Parliament. 

45.  Nothing  in  this  Act  contained  shall  extend  to  abridge 
or  alter  the  rights  and  powers  of  Her  Majesty  to  control,  sus- 
pend, or  prevent  the  execution  of  any  process  or  proceeding, 
under  this  Act  or  otherwise,  for  recovering  money  due  to  the 
Crown. 

46.  The   Acts   mentioned   in    Schedule    (C)    to   this   Act 
annexed  shall  be  repealed  to  the  extent  mentioned  in  such 
Schedule,  and  all  accounts  required  or  directed  to  be  audited 
by  the  board  of  audit  shall  be  audited  according  to  the  pro- 
visions of  this  Act;  but  nothing  herein  shall  be  deemed  to 
confer  upon  the  Treasury  the  powers  with  respect  to  audit 
vested  in  the  Admiralty  by  the  Greenwich  Hospital  Act,  1865, 
or  to  affect  any  right,  title,  obligation,  or  liability  acquired 

303 


APPENDIX  I 

or  accrued  before  the  commencement  of  this  Act:  Provided 
always,  that  this  Act  shall  not  affect  any  proceeding  which 
may  have  been  commenced  under  any  of  the  said  Acts  before 
this  Act  comes  into  operation. 

47.  This  Act  shall  commence  on  the  first  day  of  April  one 
thousand  eight  hundred  and  sixty-seven. 


SCHEDULE  A 


Dates  after  the  Termination  of  every  Financial 

Year  to  which  Appropriation  Accounts  relate, 

on  or  before  which  they  are  to  be  made  up 

and  submitted. 


Grants  or  Services  to  which 


the  Appropriation  Accounts 
relate. 

To  the  Comp- 
troller and 
Auditor-General 
by  the  Depart- 
ments. 

To  the  Treasury 
by  Comptroller 
and  Auditor- 
General. 

To  the  House 
of  Commons 
by  the 
Treasury. 

a  o_ 

ell 

Miscellaneous  Civil  Services  — 
(Classes  I.  to  VII.)  .      .      . 

Revenue  Departments  (Salaries, 
Superannuation,  &c.  and  Ex- 
penses)       

30  November 

15  January 

31  January 

•^  U"^ 

Post  Office  Packet  Service 
and       

G       *C3 

a  -u 

All  other  Services  voted  in  Sup- 
ply        

a      v 

st 

SCHEDULE  B 

Army; 

Navy; 

and  such  other  services  as  the  Treasury,  by  their  minute  to  be  laid  before 
Parliament  may  direct;  but  no  such  minute  shall  take  effect  until  it  shall 
have  lain  before  the  House  of  Commons  thirty  days,  unless  it  shall  have 
been  previously  approved  by  a  resolution  of  the  House  of  Commons. 


APPENDIX  I 


SCHEDULE  C 
Enactments  Repealed 


25  Geo.  3.  c.  52. 

27  Geo.  3.  c.  13. 
in  part. 


39  &  40  Geo.  3. 
c.  54. 

in  part. 


45  Geo.  3.  c.  55. 


46  Geo.  3. 

c.  141. 

47  Geo.  3. 
Sess.  2.  c.  39. 

52  Geo.  3.  c.  52. 


in  part;  namely, — 


An  Act  for  better  examining  and  auditing  the  Publick 
Accounts  of  this  Kingdom. 

An  Act  for  repealing  the  several 
Duties  of  Customs  and  Excise, 
and  granting  other  Duties  in  lieu 
thereof,  and  for  applying  the  said 
Duties,  together  with  the  other 
Duties  composing  the  Publick 
Revenue;  for  permitting  the  Im- 
portation of  certain  Goods,  Wares, 
and  Merchandize,  the  Produce  or 
Manufacture  of  the  European 
Dominions  of  the  French  King, 
into  this  Kingdom;  and  for  apply- 
ing certain  unclaimed  Monies, 
remaining  in  the  Exchequer  for 
the  Payment  of  Annuities  on 
Lives,  to  the  Reduction  of  the 
National  Debt 

Section  seventy-two. 

An  Act  for  more  effectually  charg- 
ing Publick  Accountants  with  the 
Payment  of  Interest;  for  allow- 
ing Interest  to  them  in  certain 
Cases;  and  for  compelling  the 
Payment  of  Balances  due  from 
them 

Sections  four,  five,  six,  nine,  ten,  and  thirteen. 

An  Act  to  amend  an  Act  made  in  the  Twenty-fifth  Year 
of  His  present  Majesty,  for  better  examining  and 
auditing  the  Publick  Accounts  of  this  Kingdom;  and 
for  enabling  the  Commissioners,  in  certain  Cases,  to 
allow  of  Vouchers,  although  not  stamped  according 
to  Law. 

An  Act  for  making  more  effectual  Provision  for  the  more 
speedy  and  regular  Examination  and  Audit  of  the 
Public  Accounts  of  this  Kingdom. 

An  Act  for  more  effectually  charging  Publick  Account- 
ants with  Interest  upon  Balances,  and  for  other 
Purposes  relating  to  the  passing  of  Publick  Accounts. 

An  Act  to  provide  for  the  speedy  and  regular  Exami- 
nation and  Audit  of  the  Public  Accounts  of  Ireland; 
and  to  repeal  certain  former  Acts  relating  thereto. 

305 


in  part;  namely, — 


APPENDIX  I 


53  Geo.  3. 
c.  ISO. 


57  Geo.  3.  c.  48. 


1  &  2  Geo.  4. 

c.  121. 

in  part. 


10  Geo.  4.  c.  27. 

2  &  3  Will.  4. 
c.  26. 


2  &  3  Wffl.  4. 
c.  99. 


c.  104. 


4  &  5  Will.  4. 

c.  15. 

in  part. 


An  Act  for  the  more  speedy  and  effectual  Examination 
and  Audit  of  the  Accounts  of  Military  Expenditure 
in  Spain  and  Portugal;  for  removing  Delays  in  passing 
the  Public  Accounts;  and  for  making  new  Arrange- 
ments for  conducting  the  Business  of  the  Audit 
Office. 

An  Act  to  make  further  Provision  for  the  Adjustment 
of  the  Accounts  of  the  Consolidated  Fund  of  the 
United  Kingdom;  and  for  making  good  any  occa- 
sional Deficiency  which  may  arise  in  the  said  Fund 
in  Great  Britain  or  Ireland  respectively;  and  to 
direct  the  Application  of  Monies  by  the  Com- 
missioners for  the  Reduction  of  the  National 
Debt. 

An  Act  to  alter  and  abolish  certain 
Forms  of  Proceedings  in  the  Ex- 
chequer and  Audit  Office  relative 
to  Public  Accountants;  and  for 
making  further  Provisions  for  the 
Purpose  of  facilitating  and  expe- 
diting the  passing  of  Public  Ac- 
counts in  Great  Britain;  and  to 
render  perpetual  and  amend  an 
Act  passed  in  the  Fifty-fourth 
Year  of  His  late  Majesty  for  the 
effectual  Examination  of  the 
Accounts  of  certain  Colonial 
Revenues 

Except  sections   twenty-seven,  twenty-eight,  and 
twenty-nine. 

An  Act  to  amend  the  several  Acts  for  regulating  the 
Reduction  of  the  National  Debt. 

An  Act  to  authorize  the  Commissioners  for  Auditing 
the  Public  Accounts  of  Great  Britain  to  examine  and 
audit  Accounts  of  the  Receipt  and  Expenditure  of 
Colonial  Revenues. 

An  Act  for  transferring  the  Powers  and  Duties  of  the 
Commissioners  of  Public  Accounts  in  Ireland  to  the 
Commissioners  for  Auditing  the  Public  Accounts  of 
Great  Britain. 

An  Act  to  regulate  the  Period  of  rendering  the  Public 
Accounts  and  making  up  the  General  Imprest  Cer- 
tificates. 

An  Act  to  regulate  the  Office  ofl 
the    Receipt    of    His    Majesty's  >  : — 
Exchequer  at  Westminster 

Except  sections  seven  and  twenty-six. 

306 


APPENDIX  I 


3  &  4  Viet. 
c.  108. 

in  part. 


9  &  10  Viet. 
c.  92. 


14  &  15  Viet. 

c.  42. 

in  part. 


17  &  18  Viet. 
c.  19. 
c.  94. 

in  part. 


18  &  19  Viet. 

c.  96. 

in  part. 

24  &  25  Viet. 

c.  93. 


28  &  29  Viet. 
c.  93. 


An    Act    for    the    Regulation    of] 

Municipal  Corporations  in  Ire- [  in  part;  namely, — 
land  J 

Sections  two  hundred  and  thirteen  and  two  hundred 
and  fourteen. 

An  Act  to  provide  for  the  Preparation,  Audit,  and 
Presentation  to  Parliament  of  Annual  Accounts  of  the 
Receipt  and  Expenditure  of  the  Naval  and  Military 
Departments. 

An  Act  to  make  better  Provision 
for  the  Management  of  the  Woods, 
Forests,  and  Land  Revenues  of 
the  Crown,  and  for  the  Direction 
of  Public  Works  and  Buildings 

Section  thirty-eight  wholly,  and  section  thirty-nine 
as  far  as  it  relates  to  the  Accounts  of  the  Com- 
missioners of  Her  Majesty's  Works  and  Public 
Buildings. 

The  Naval  Pay  and  Prize  Act,  1854 


in  part;  namely, — 


in  part;  namely, — 


in  part;  namely, — 


An  Act  to  alter  the  mode  of  pro- 
viding for  certain  Expenses  now 
charged  upon  certain  Branches 
of  the  Public  Revenues  and  upon 
the  Consolidated  Fund 

Sections  three,  four,  and  five. 

The   Supplemental    Customs  Con- 
solidation Act,  1855 
Section  one. 

An  Act  to  provide  for  the  Preparation,  Audit,  and 
Presentation  to  Parliament  of  Annual  Accounts  of 
the  Appropriation  of  the  Moneys  voted  for  the 
Revenue  Departments. 

An  Act  to  consolidate  the  Offices  of  Comptroller-General 
of  the  Exchequer  and  Chairman  of  the  Commis- 
sioners for  auditing  the  Public  Accounts,  and  for 
other  Purposes. 


TREASURY  MINUTE  DATED  2ND  MARCH  1867 

i.  My  Lords  have  had  under  consideration  the  Act  29  & 
30  Viet.  c.  39,  intituled  "An  Act  to  consolidate  the  Duties 
of  the  Exchequer  and  Audit  Departments,  to  regulate  the 
Receipt,  Custody  and  Issue  of  Public  Moneys,  and  to  provide 
for  the  Audit  of  the  Accounts  thereof." 

307 


APPENDIX  I 

2.  The  regulations  necessary  for  carrying  into  effect  the 
provisions  of  this  Act  may  be  divided  under  three  heads : — 

ist.  The  Regulations  connected  with  the  accounts  of  the 
"Appropriation"  of  the  Grants  of  Parliament. 

2nd.  The  Regulations  applicable  to  the  Audit  of  the  Ac- 
counts of  persons  intrusted  with  the  receipt  and  dis- 
bursement of  Public  or  other  Moneys. 

3rd.  The  Regulations  for  carrying  into  effect  the  provisions 
of  the  Act  so  far  as  they  relate  to  the  receipt  and  issue 
of  Public  Moneys  on  the  Exchequer  Account. 

3.  The  provisions  relating  to  the  Audit  of  the  "Appropria- 
tion" Accounts  referred  to  under  the  first  head  are  contained 
in  the  sections  21  to  32  of  the  Act.    My  Lords  have  already, 
as  appears  by  Their  Minute  of  June  22nd,  1866,  taken  steps 
to  enable  them  to  discharge  the  duties  imposed  upon  them 
by  the  23rd  section  of  the  Act,  by  appointing  a  Committee 
to  prepare  plans  and  regulations  for  keeping  and  rendering 
for  audit  the  several  Departmental  Accounts.     They  have 
instructed  the  Committee  to  consider  also  what  improvements 
may  be  made  in  the  classification  of  the  Annual  Estimates  for 
Miscellaneous   Services,   the  accounts   for  which    (with   the 
exception  of  those  of  the  Departments  of  Works  and  Public 
Buildings,  and  of  Woods)  are  now,  for  the  first  time,  to  be 
subjected  to  an  "Appropriation"   Audit.     When   the  Com- 
mittee shall   have  made  their  Reports   upon   these  matters 
My  Lords  will  be  prepared  to  make  such  regulations  as  may 
appear  to  them  advisable,  in  order  to  carry  out  the  intentions 
of  the  Act  in  this  respect;  and  they  direct  that,  until  such 
Reports  shall  have  been  received,  and  instructions  consequent 
thereupon  shall  have  been  issued  in  reference  to  the  preparing 
and  rendering  of  any  of  the  Appropriation  Accounts,  every 
account  which  is  now  audited  by  the  Commissioners  of  Audit, 
and  which  relates  to  the  final  expenditure  of  a  vote,  shall 
continue  to  be  examined   in   the   same  manner,   and   under 
the  same  regulations  as  they  would  have  been,  if  the  Com- 

308 


APPENDIX  I 

missioners  of  Audit  had  continued  to  be  charged  with  the 
Audit  thereof. 

4.  With   respect  to  the  Audit  of  Accounts,   other  than 
Appropriation  Accounts,  referred  to  under  the  second  head, 
My  Lords  direct  that  the  Accounts  specially  designated  in 
the  33rd  section  of  the  Act,  annexed  to  this  Minute  shall  be 
audited  by  the  Exchequer  and  Audit  Department  in  the  same 
manner  and  under  the  same  regulations  (so  far  as  the  same 
are  not  affected  by  the  Act)  as  they  would  have  been  if  the 
Commissioners  of  Audit  had  continued  to  be  charged  with 
the  Audit  thereof. 

My  Lords  will  be  prepared,  by  a  subsequent  Minute,  to 
direct  what  other  Public  Accounts,  not  relating  directly  to  the 
Receipt  or  Expenditure  of  Imperial  Funds,  shall  be  trans- 
mitted to  the  Comptroller  and  Auditor-General  for  examina- 
tion and  audit  under  the  provisions  of  the  said  33rd  section. 

5.  My  Lords  proceed  to  define  the  regulations  for  the 
Receipt  and  Issue  of  Public  Money  on  the  Exchequer  Account, 
referred  to  under  the  third  head. 

6.  The  loth  section  of  the  above  Act  relates  to  the  payment 
of  the  gross  receipts  of  the  Revenue  Departments  to   the 
Account  of  Her  Majesty's  Exchequer  at  the  Bank  of  England, 
and  to  a  similar  Account  at  the  Bank  of  Ireland.    My  Lords 
desire  that  the  Commissioners  of  Customs,  and  the  Commis- 
sioners of  Inland  Revenue,  will  continue  to  cause  the  Revenue, 
collected  in  their  respective  Departments,  to  be  paid  to  the 
Banks  daily,  as  prescribed  by  Treasury  Minute  of  the  2nd 
March  1855  J  *  and  the  Postmaster-General  and  the  Commis- 
sioners of  Woods  and  Forests,  and  the  Paymaster-General 
will  also  continue  to  regulate  the  payments  of  Revenue,  and 
other  receipts  in  their  respective   Departments  to  the   Ex- 
chequer Account,  from  time  to  time,  according  to  the  present 
custom.      The   several   Revenue   Departments  will   transmit 
to  this  Board  as  well  as  to  the  Comptroller  and  Auditor- 
General  certificates,  according  to  the  forms  annexed,  No.  I 

1  See  Parliamentary  Paper  No.  375,  Session  1856,  Appendix,  page  583. 

309 


APPENDIX  I 

(a  &  b),  of  the  sums  so  paid  to  the  Exchequer  Account,  at  the 
same  time  as  their  orders  are  sent  to  the  Banks  to  place  the 
moneys  to  the  credit  of  the  said  Account. 

7.  The   1 2th  section  of  the  Act  directs  that  accounts  of 
the  income  and 1  charge  of  the  Consolidated  Fund  shall  be 
prepared  by  the  Treasury  at  the  close  of  each  quarter,  and 
that   such   accounts   shall   be   forthwith   transmitted   to  the 
Comptroller  and  Auditor-General.     The  object  of  this  enact- 
ment is  to  enable  that  officer  to  certify  the  amount  of  the 
deficiency  for  which  this  Board  may  be  authorised  to  obtain 
advances,  from  the  Banks  of  England  and  Ireland,  to  meet 
the  charges  of  the  Consolidated  Fund  for  each  quarter;  and 
also  to  enable  him  to  satisfy  himself  of  the  correctness  of  the 
amount   for  which   credits   on  the   Exchequer   Account,   to 
meet  such  charges,  may  from  time  to  time  be  authorised  by 
this  Board  under  the  I3th  section  of  the  Act.    My  Lords  will 
cause  the  said  accounts  to  be  transmitted  to  the  Comptroller 
and  Auditor-General  as  soon  as  possible  after  the  close  of 
each  quarter,  prepared  in  the  Form  No.  2,  annexed  to  this 
Minute;    and   the   Comptroller   and    Auditor-General,    after 
satisfying  himself  of  the  correctness  of  the  deficiency  of  the 
income  to  meet  the  charge  of  the  Consolidated  Fund  for  the 
said  quarter,  will  transmit  to  the  said  Banks  a  certificate  of 
the  amount,  of  such  deficiency  according  to  the  Form  No.  3, 
annexed. 

8.  The   applications   of   the   Treasury   to   the   Banks    for 
advances  from  time  to  time  on  account  of  the  said  deficiency 
will  be  according  to  the  Form  No.  4,  annexed. 

9.  The  1 3th  section  of  the  Act  requires  the  Comptroller 
and  Auditor-General  to  grant  to  this  Board,  on  their  requisi- 
tions authorising  the  same,  credits  on  the  Exchequer  Account 
at  the  Banks  of  England  and  Ireland  to  provide  for  the  pay- 
ment of  the  charges  on  the  Consolidated  Fund  included  in  the 
aforesaid  quarterly  accounts  of  Income  and  Charge  remaining 

1  The  words  "incoming  charge"  are  a  palpable  slip  and  have  been  cor- 
rected. 

310 


APPENDIX  I 

unpaid;  as  well  as  to  grant  credits  from  time  to  time  during 
the  succeeding  quarter,  on  similar  requisitions  for  services 
payable  out  of  the  "growing  produce"  of  the  Consolidated 
Fund. 

10.  At   the   periods   when   the   quarterly   charges   on   the 
Consolidated  Fund  become  payable,  My  Lords  will  authorise 
the  Comptroller  and  Auditor-General,  by  requisitions  according 
to  Forms  Nos.  5  and  6,  to  grant  such  credits,  in  part  or  in  full 
of  such  charges.     When  the  credits  so  authorised  shall  have 
been  granted  to  this  Board  by  the  Comptroller  and  Auditor- 
General  according  to  Forms  Nos.  7  and  8,  My  Lords  will 
direct  the  Banks,  from  time  to  time,  to  make  the  necessary 
issues  or  transfers,  as  required  by  the  Act,  from  the  Exchequer 
Account  to  the  accounts  of  the  Principal  Accountants,  charged 
with  the  duty  of  making  the  public  payments,  according  to 
Form  No.   9,   annexed  to  this  Minute.     These  authorities, 
when  acted  upon,  are  to  be  transmitted  by  the  Banks  to  the 
Comptroller  and  Auditor-General. 

11.  A  daily  account  of  such  issues   (including  the  issues 
out  of  credits  granted  for  supply  services  hereinafter  referred 
to)  is  to  be  transmitted  by  the  Bank  of  England  to  the  Comp- 
troller and  Auditor-General  and  to  this  Board,  according  to 
Form  No.   10;  and  a  similar  account  is  to  be  sent  by  the 
Bank  of  Ireland  to  the  two  departments  according  to  Form 
No.  n,  annexed  to  this  Minute. 

12.  The  issues  to  Principal  Accountants  will  be  regulated 
according  to  the  provisions  of  the  I5th  section  of  the  Act. 
When  Ways  and  Means  shall  have  been  granted  to  Her 
Majesty  by  Act,  My  Lords  will  authorise  the  Comptroller  and 
Auditor-General  by  requisition  according  to  Form  No.   12, 
annexed,  to  place  credits  at  their  disposal  at  the  Banks  of 
England  and  Ireland  to  enable  them  to  supply  the  Principal 
Accountants  with  the  funds  necessary  for  carrying  on  the 
public  service.     Upon  the  grant  of  credits  on  the  Exchequer 
Accounts  at  the  said  Banks  by  the  Comptroller  and  Auditor- 
General   (according  to  Form  No.   13),  the  actual  issues  or 


APPENDIX  I 

transfers  to  the  accounts  of  such  Accountants  will  be  made 
by  orders  of  this  Board,  under  the  authority  of  a  Royal  Order 
(see  Form  No.  14,  annexed),  in  accordance  with  the  provi- 
sions of  the  I4th  and  i5th  sections  of  the  Act. 

13.  The   orders   for   issues    for   Supply   Services   will   be 
prepared  according  to  Form  No.  15,  annexed  to  this  minute, 
and  when  acted  upon  they  will  be  transmitted  by  the  Bank 
of  England  and  the  Bank  of  Ireland  to  the  Comptroller  and 
Auditor-General  to  afford  him  the  means  of  verifying  the 
accounts  to  be  prepared  by  this  Board,  under  the  i6th  section 
of  the  Act,  and  which  he  is  required  by  the  Act  to  certify 
previously  to  their  being  submitted  to  Parliament.     A  daily 
statement  of  such  issues  will  be  included  in  the  accounts  to 
be  transmitted  to  this  Board,  and  to  the  Comptroller  and 
Auditor-General,  by  the  Banks  of  England  and  Ireland  (as 
hereinbefore  directed),  according  to  Forms  Nos.  10  and  n. 

14.  On  the  first  application  of  the  new  regulations  after 
the  close  of  the  present  financial  year,  it  will  be  necessary  that 
a  Royal  Order  should  be  obtained  for  cancelling  all  previous 
Royal  Orders  for  public  Supply  Services,  so  far  as  they  may 
remain  unexecuted  on  the  3ist  March  next.     A  new  Royal 
Order  will  therefore  be  obtained  to  authorise  the  issues  to 
Principal  Accountants  out  of  credits  to  be  granted  upon  the 
Exchequer  Account  to  the  extent  of  the  balance  of  Ways  and 
Means  of  prior  years  which  may  remain  unissued  on  that  day. 

15.  As  under  the  existing  system  of  granting  credits  upon 
the  Account  of  Her  Majesty's  Exchequer  at  the  Bank  of 
England  to  Public  Accountants,  there  will  remain  unexhausted 
credits  on  that  Account  on  the  3ist  March  next,  and  as  after 
the  ist  April  next,  actual  transfers  to  those  Accounts  are  to 
be  substituted  for  credits  on  the  Exchequer  Account,   My 
Lords  request  that  the  Bank  of  England  will,  on  3ist  March 
next,  transfer  all  such  balances  of  credits  from  the  Exchequer 
Account  to  the  separate  Accounts  of  the  persons  in  whose 
favour  they  may  have  been  granted. 

1 6.  It  will  be  necessary,  in  the  case  of  the  Paymaster- 

312 


APPENDIX  I 

General,  to  open  in  the  books  of  the  Bank  of  England  a  new 
account,  to  be  called  "The  Paymaster-General's  Supply 
Account,"  to  which  the  balance  of  credits  above  mentioned 
granted  to  that  officer  should  be  transferred.  This  Account 
is  to  be  operated  upon  by  the  Paymaster-General  solely  by 
Writes-off  to  his  Drawing  and  Bill  Accounts. 

17.  The  1 6th  section  of  the  Act,  so  far  as  its  provisions 
relate  to  the  preparation  of  the  Account  therein  referred  to, 
showing  the  surplus  of  Revenue  applicable  to  the  reduction 
of  the  National  Debt,  is  already  in  operation  under  the  pro- 
visions of  the  Act  57  Geo.  III.  c.  48 ;  but  a  new  provision  has 
been  added  to  the  section,  which  renders  it  necessary  that  the 
Account  in  question  should  be  certified  by  the  Comptroller 
and  Auditor-General,  before  it  is  presented  to  Parliament. 
My  Lords  will  cause  the  Account  to  be  transmitted  to  the 
Comptroller    and    Auditor-General    immediately    after    the 
expiration  of  each  quarter,  in  order  that  it  may  be  certified 
and  presented  to  the  House  of  Commons  within  the  period 
of  fifteen  days  specified  in  the  Act. 

1 8.  Let  a  copy  of  this  Minute  be  transmitted  to  Sir  William 
Dunbar,1    to   the   Paymaster-General,    the   several   Revenue 
Departments,  the  Bank  of  England,  the  National  Debt  Com- 
missioners, the  Bank  of  Ireland,  the  Inclosure  Commissioners, 
the  Master  of  the  Mint,  and  the  Commissioners  of  Public 
Works  in  Ireland,  for  their  information  and  guidance;  and 
request  Sir  William  Dunbar  to  inform  this  Board  if  he  has 
any  alteration  to  suggest  in  the  Forms  of  Authorities,  Nos.  3, 
7,  8,  and  13,  annexed  to  this  Minute,  which  are  to  emanate 
from  his  department. 

19.  Let  a  copy  of  this  Minute  be  laid  before  the  House  of 
Commons. 

1Then  Comptroller  and  Auditor  General. 


APPENDIX  II 

CONSOLIDATED  FUND  (NO.  l)  BILL,  IQI2 

A  BILL  to  apply  certain  sums  out  of  the  Consolidated  Fund  to 
the  service  of  the  years  ending  on  the  thirty-first  day 
of  March  one  thousand  nine  hundred  and  eleven,  one 
thousand  nine  hundred  and  twelve,  and  one  thousand 
nine  hundred  and  thirteen. 

MOST  GRACIOUS  SOVEREIGN — We,  Your  Majesty's  most  duti- 
ful and  loyal  subjects,  the  Commons  of  the  United  Kingdom 
of  Great  Britain  and  Ireland  in  Parliament  assembled, 
towards  making  good  the  supply  which  we  have  cheerfully 
granted  to  Your  Majesty  in  this  session  of  Parliament,  have 
resolved  to  grant  unto  Your  Majesty  the  sums  herein-after 
mentioned;  and  do  therefore  most  humbly  beseech  Your 
Majesty  that  it  may  be  enacted,  and  be  it  enacted  by  the 
King's  most  Excellent  Majesty,  by  and  with  the  advice  and 
consent  of  the  Lords  Spiritual  and  Temporal,  and  Commons, 
in  this  present  Parliament  assembled,  and  by  the  authority 
of  the  same,  as  follows : — 

1.  The  Treasury  may  issue  out  of  the  Consolidated  Fund 
of  the  United  Kingdom  of  Great  Britain  and  Ireland,  and 
apply  towards  making  good  the  supply  granted  to  His  Majesty 
for  the  service  of  the  years  ending  on  the  thirty- first  day  of 
March  one  thousand  nine  hundred  and  eleven  and  one  thou- 
sand nine  hundred  and  twelve,  the  sum  of  two  hundred  and 
forty-one  thousand  one  hundred  and  seventeen  pounds. 

2.  The  Treasury  may  issue  out  of  the  Consolidated  Fund 
of  the  United  Kingdom  of  Great  Britain  and  Ireland,  and 
apply  towards  making  good  the  supply  granted  to  His  Majesty 


APPENDIX  II 

for  the  service  of  the  year  ending  on  the  thirty-first  day  of 
March  one  thousand  nine  hundred  and  thirteen  the  sum  of 
fifty-nine  million  seventy-two  thousand  one  hundred  pounds. 

3. — ( i )  The  Treasury  may  borrow  from  any  person,  by  the 
issue  of  Treasury  Bills  or  otherwise,  and  the  Bank  of  England 
and  the  Bank  of  Ireland  may  advance  to  the  Treasury  on  the 
credit  of  the  said  sums,  any  sum  or  sums  not  exceeding  in  the 
whole  fifty-nine  million  three  hundred  and  thirteen  thousand 
two  hundred  and  seventeen  pounds. 

(2)  The  date  of  payment  of  any  Treasury  Bills  issued 
under  this  section  shall  be  a  date  not  later  than  the  thirty- 
first  day  of  March  one  thousand  nine  hundred  and  thirteen, 
and  section  six  of  the  Treasury  Bills  Act,  1877  (which  relates 
to  the  renewal  of  bills),  shall  not  apply  with  respect  to  those 
bills. 

•  (3)  Any  money  borrowed  otherwise  than  on  Treasury  Bills 
shall  be  repaid,  with  interest  not  exceeding  five  pounds  per 
cent  per  annum,  out  of  the  growing  produce  of  the  Con- 
solidated Fund,  at  any  period  not  later  than  the  next  suc- 
ceeding quarter  to  that  in  which  the  money  was  borrowed. 

(4)  Any  money  borrowed  under  this  section  shall  be  placed 
to  the  credit  of  the  account  of  the  Exchequer,  and  shall  form 
part  of  the  said  Consolidated  Fund,  and  be  available  in  any 
manner  in  which  such  Fund  is  available. 

4.  This  Act  may  be  cited  as  the  Consolidated  Fund  (No.  i ) 
Act,  1912. 


Note. — Section  6  of  the  Treasury  Bills  Act,  1877,  referred  to  in 
Clause  3  (2)  of  the  above  Bill,  empowers  the  Treasury  to  issue  Treas- 
ury Bills  or  Exchequer  Bills  in  lieu  of  Bills  paid  off  during  the  same 
financial  year. 


APPENDIX  III 

CONSOLIDATED  FUND    (APPROPRIATION)    ACT, 

2  &  3  GEO.  V.  c.  7  [^th  August  1912] 

An  Act  to  apply  a  sum  out  of  the  Consolidated  Fund  to  the 
service  of  the  year  ending  on  the  thirty-first  day  of  March 
one  thousand  nine  hundred  and  thirteen,  and  to  appro- 
priate the  Supplies  granted  in  this  Session  of  Parliament. 

MOST  GRACIOUS  SOVEREIGN — We,  Your  Majesty's  most  duti- 
ful and  loyal  subjects,  the  Commons  of  the  United  Kingdom 
of  Great  Britain  and  Ireland  in  Parliament  assembled,  towards 
making  good  the  supply  which  we  have  cheerfully  granted  to 
Your  Majesty  in  this  session  of  Parliament,  have  resolved  to 
grant  unto  Your  Majesty  the  sum  herein-after  mentioned; 
and  do  therefore  most  humbly  beseech  Your  Majesty  that  it 
may  be  enacted;  and  be  it  enacted  by  the  King's  most  Ex- 
cellent Majesty,  by  arid  with  the  advice  and  consent  of  the 
Lords  Spiritual  and  Temporal,  and  Commons,  in  this  present 
Parliament  assembled,  and  by  the  authority  of  the  same, 
as  follows: — 

GRANTS  OUT  OF  CONSOLIDATED  FUND 

i.  The  Treasury  may  issue  out  of  the  Consolidated  Fund 
of  the  United  Kingdom  of  Great  Britain  and  Ireland,  and 
apply  towards  making  good  the  supply  granted  to  His  Majesty 
for  the  service  of  the  year  ending  on  the  thirty-first  day  of 
March  one  thousand  nine  hundred  and  thirteen  the  sum  of 
ninety-two  million  eight  hundred  and  forty-seven  thousand 
three  hundred  and  forty-three  pounds. 

316 


APPENDIX  III 

2. — ( i )  The  Treasury  may  borrow  from  any  person,  by  the 
issue  of  Treasury  Bills  or  otherwise,  and  the  Bank  of  England 
and  the  Bank  of  Ireland  may  advance  to  the  Treasury  on  the 
credit  of  the  said  sums,  any  sum  or  sums  not  exceeding  in 
the  whole  ninety-two  million  eight  hundred  and  forty-seven 
thousand  three  hundred  and  forty-three  pounds. 

(2)  The  date  of  payment  of  any  Treasury  Bills  issued 
under  this  section  shall  be  a  date  not  later  than  the  thirty- 
first  day  of  March  one  thousand  nine  hundred  and  thirteen 
and  section  six  of  the  Treasury  Bills  Act,  1877  (which  relates 
to  the  renewal  of  bills),  shall  not  apply  with  respect  to  those 
bills. 

(3)  Any  money  borrowed  otherwise  than  on  Treasury  Bills 
shall  be  repaid,  with  interest  not  exceeding  five  pounds  per 
cent  per  annum,  out  of  the  growing  produce  of  the  Consoli- 
dated Fund,  at  any  period  not  later  than  the  next  succeeding 
quarter  to  that  in  which  the  money  was  borrowed. 

(4)  Any  money  borrowed  under  this  section  shall  be  placed 
to  the  credit  of  the  account  of  the  Exchequer,  and  shall  form 
part  of  the  said  Consolidated  Fund,  and  be  available  in  any 
manner  in  which  such  Fund  is  available. 

APPROPRIATION  OF  GRANTS 

3.  All  sums  granted  by  this  Act  and  the  other  Act  men- 
tioned in  Schedule  (A.)  annexed  to  this  Act  out  of  the  said 
Consolidated  Fund  towards  making  good  the  supply  granted 
to  His  Majesty,  amounting,  as  appears  by  the  said  schedule, 
in  the  aggregate,  to  the  sum  of  one  hundred  and  fifty-two 
million  one  hundred  and  sixty  thousand  five  hundred  and  sixty 
pounds  are  appropriated,  and  shall  be  deemed  to  have  been 
appropriated  as  from  the  date  of  the  passing  of  the  Acts 
mentioned  in  the  said  Schedule  (A.),  for  the  services  and 
purposes  expressed  in  Schedule  (B.)  annexed  hereto. 

The  abstract  of  schedules  and  schedules  annexed  hereto, 
with  the  notes  (if  any)  to  such  schedules,  shall  be  deemed  to 

317 


APPENDIX  III 

be  part  of  this  Act  in  the  same  manner  as  if  they  had  been 
contained  in  the  body  thereof. 

In  addition  to  the  sums  hereby  granted  out  of  the  Con- 
solidated Fund,  there  may  be  applied  out  of  any  money 
directed  under  section  two  of  the  Public  Accounts  and  Charges 
Act,  1891,  to  be  applied  as  appropriations  in  aid  of  the  grants 
for  the  services  and  purposes  specified  in  Schedule  (B.)  an- 
nexed hereto,  the  sums  respectively  set  forth  in  the  last 
column  of  the  said  schedule. 

4. — (i)  So  long  as  the  aggregate  expenditure  on  naval  and 
military  services  respectively  is  not  made  to  exceed  the 
aggregate  sums  appropriated  by  this  Act  for  those  services 
respectively,  any  surplus  arising  on  any  vote  for  those  services, 
either  by  an  excess  of  the  sum  realised  on  account  of  appro- 
priations in  aid  of  the  vote  over  the  sum  which  may  be  applied 
under  this  Act  as  appropriations  in  aid  of  that  vote,  or  by 
saving  of  expenditure  on  that  vote,  may,  with  the  sanction  of 
the  Treasury,  be  temporarily  applied  either  in  making  up  any 
deficiency  in  the  sums  realised  on  account  of  appropriations 
in  aid  of  any  other  vote  in  the  same  department,  or  in  defray- 
ing expenditure  in  the  same  department  which  is  not  provided 
for  in  the  sums  appropriated  to  the  service  of  the  department 
by  this  Act,  and  which  it  may  be  detrimental  to  the  public 
service  to  postpone  until  provision  can  be  made  for  it  by 
Parliament  in  the  usual  course. 

(2)  A  statement  showing  all  cases  in  which  the  sanction  of 
the  Treasury  has  been  given  to  the  temporary  application  of 
a  surplus  under  this  section,  and  showing  the  circumstances 
under  which  the  sanction  of  the  Treasury  has  been  given, 
shall  be  laid  before  the  House  of  Commons  with  the  appropri- 
ation accounts  of  the  naval  and  military  services  for  the  year, 
in  order  that  any  temporary  application  of  any  surplus  sanc- 
tioned by  the  Treasury  under  this  section  may  be  submitted 
for  the  sanction  of  Parliament. 

5.  Whereas  under  the  powers  given  for  the  purpose  by  the 
Appropriation  Act,  1910,  and  the  Appropriation  Act,  1911, 


APPENDIX  III 

surpluses  arising  on  certain  votes  for  the  naval  and  military 
services  respectively  have  been  temporarily  applied  as  shown 
in  the  accounts  set  out  in  Schedule  (C.)  to  this  Act: 

It  is  enacted  that  the  application  of  those  surpluses  as 
shown  in  the  said  accounts  is  hereby  sanctioned. 

6.  A  person  shall  not  receive  any  part  of  a  grant  which 
may  be  made  in  pursuance  of  this  Act  for  half-pay  or  army, 
navy,  or  civil  non-effective  services,  until  he  has  subscribed 
such  declaration  as  may  from  time  to  time  be  prescribed  by  a 
warrant  of  the  Treasury  before  one  of  the  persons  prescribed 
by  such  warrant : 

Provided  that,  whenever  any  such  payment  is  made  at 
more  frequent  intervals  than  once  in  a  quarter,  the  Treasury 
may  dispense  with  the  production  of  more  than  one  declara- 
tion in  respect  of  each  quarter. 

Any  person  who  makes  a  declaration  for  the  purpose  of 
this  section,  knowing  the  same  to  be  untrue  in  any  material 
particular,  shall  be  guilty  of  a  misdemeanour. 

7.  This  Act  may  be  cited  for  all  purposes  as  the  Appropria- 
tion Act,  1912. 


APPENDIX  III 


ABSTRACT  OF  SCHEDULES  (A.)  AND  (B.)  TO  WHICH  THIS  ACT  REFERS 

SCHEDULE  (A.) 

Grants  out  of  the  Consolidated  Fund          .        .        .        .          £152,160,560 
SCHEDULE  (B.)— APPROPRIATION  OF  GRANTS 


Sums  not  exceeding 

Supply  Grants. 

Appropriations  in  Aid. 

1910-1911-1912. 
Part  1.     Navy  Excesses,1910-191  1 
"     2.     Civil  Services  (Supple- 
mentary), 1911-1912 

1912-1913. 

"     3.     Navy   .       .       .       . 
(Army  .... 
Army  (Ordnance  Fac- 
tories) 

"     5.  Civil  Services,  Class  I. 
"     6             "            Class  II. 
"     7.            "            Class  III. 
"     8.            "            Class  IV. 
"     9.            "            Class  V. 
"  10.            "            Class  VI. 
"11.            "            Class  VII. 
"  12.            "            Class  VIII. 

TOTAL  CIVIL  SERVICES. 
"  13.  Revenue  Dpts.,  &c.    . 
GRAND  TOTAL    . 

£        s.     d. 
100     0     0 

241,017     0     0 

£          s.      d 

28,795  10  10 
27,190     0     0 

241,117     0    0 

55,985  10  10 

45,075,400    0    0 
27,860,000    0    0 

100    0    0 

1,863,892     0    0 
3,414,165     0    0 

2,923,000     0     0 

72,935,500    0    0 

8,201,057     0    0 

3,831,430    0    0 
4,182,144     0     0 
4,621,535     0     0 
19,705,454     0     0 
2,142,768     0     0 
13,014,564     0     0 
380,699     0     0 
3,042,669     0     0 

125,263     0    0 
828,481     0     0 
851,101     0     0 
30,774    0    0 
138,366     0     0 

7,250    0    0 
202,500    0    0 

50,921,263     0    0 

2,183,735     0    0 

28,062,680     0     0 

734,963     0    0 

152,160,560    0    0 

11,175,740  10  10 

APPENDIX  III 


SCHEDULE  (A.) 
GRANTS  OUT  OF  THE  CONSOLIDATED  FUND 

For  the  service  of  the  years  ended  on  the  £          s.    d. 

31st  day  of  March  1911  and  1912:— 

Under  Act  2  Geo.  5.  c.  1    .        .        .          241,117     0     0 
For  the  service  of  the  year  ending  on  the 
31st  day  of  March  1913:— 

Under  Act  2  Geo.  5.  c.  1    .       .       .     59,072,100    0    0 
Under  this  Act 92,847,343     0    0 


TOTAL   . 


.  152,160,560    0    0 


SCHEDULE  (B.)— PART  1 
NAVY  EXCESSES,  1910-1911 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

£       s.     d. 

£         *.      d. 

SUM  granted  to   make  good 

Excesses  of 

Navy  Expenditure 

beyond 

the  Grants 

for  the  year  ended 

on  the 

31st  day  of 

March  1911      . 

. 

100    0    0 

28,795  10  10 

APPENDIX  III 


SCHEDULE  (B.)— PART  2 
CIVIL  SERVICES  (SUPPLEMENTARY),  1911-1912 

SCHEDULE  of  SUPPLEMENTARY  SUMS  granted  to  defray  the  charges  for  the 
Services  herein  particularly  mentioned  for  the  year  ended  on  the!  31st 
day  of  March  1912;  viz.: — 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

£ 

£ 

CIVIL  SERVICES. 

CLASS  II. 

For  the  Salaries  and  Expenses  in  the  Offices 

of  the  House  of  Commons    .... 

10 

940 

For  the  Salaries  and  Expenses  of  the  Board 

of  Agriculture  and  Fisheries,  and  of  Royal 

Botanic  Gardens,  Kew,  including  certain 

Grants  in  Aid         

11,400 

18,105 

For    Stationery,    Printing,    Paper,    Binding 

and  Printed  Books  for  the  Public  Service, 

for  the  Salaries  and  Expenses  of  the  Sta- 

tionery  Office,   and  for  Sundry  Miscella- 

neous Services,  including  Reports  of  Parlia- 

mentary Debates    

47,000 

2,000 

For  the  Salaries  and  Expenses  of  the  Depart- 

ment of  Agriculture  and  other  Industries 

and    Technical    Instruction    for    Ireland, 

and  of  the  Services  administered  by  that 

Department    

5 

6,645 

For  the  Salaries  and  Expenses  of  the  Local 

Government  Board,  Ireland,  and  to  en- 

able it  to  make  good  certain  Statutory 

advances         

50,000 

CLASS  III. 

For  certain  Miscellaneous  Legal  Expenses 

1,000 

For  such  of  the  Salaries  and  Expenses  of  the 

Supreme  Court  of  Judicature  and  Court 

of  Criminal  Appeal  as  are  not  charged  on 

the  Consolidated  Fund         .... 

1,600 

.. 

For  the  Salaries  and  Expenses  of  the  Estab- 

lishment of  the  Crofters  Commission     . 

120 

•• 

Carried  forward 

111,135 

27,690 

322 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

£ 

£ 

Brought  forward 

111,135 

27,690 

For  the  Salaries  and  Expenses  of  the  Com- 

missioner  of   Police,   the   Police   Courts, 

and    Metropolitan    Police    Establishment 

3,500 

500  l 

CLASS  IV. 

For  the  Salaries  and  Expenses  of  the  Nation- 

al Gallery,  including  a  Grant  in  Aid  for 

the  Purchase  of  Pictures       .... 

17,776 

.  . 

For  the  Salaries  and  Expenses  of  the  Nation- 

al Portrait  Gallery         

40 

For  Public  Education  in  Scotland,  and  for 

Science  and  Art  in  Scotland 

15,000 

•• 

CLASS  V. 

For   making   good   the   net   loss   on   trans- 

actions   connected    with    the    raising    of 

money  for  the  various  Treasury  Chests 

Abroad  in  the  year  1910-1911     . 

42,666 

•  • 

CLASS  VII. 

For  Expenditure  in  connection  with  Inter- 

national  Exhibitions    (including  a  Grant 

in  Aid  of  the  Expenses  of  the  Royal  Com- 

mission for  the  Brussels,  Rome,  and  Turin 

Exhibitions)    

19,300 

.  . 

For  a  Grant  in  Aid  of  the  Expenses  incurred 

on    account    of    the    Coronation    of    His 

Maiesty   the   King,    including   the   State 

Visits  to  Ireland,  Wales  and  Scotland     . 

10 

•• 

CLASS  VIII. 

For  the  Salaries  and  Expenses  of  the  Offices 

of  the  Insurance  Commissioners  in  Eng- 

land, Wales,  Scotland  and  Ireland,  and  of 

31,590 

Total    . 

241,017 

27,190 

»  Deficit. 
323 


APPENDIX  III 


SCHEDULE  (B.)— PART  3 
NAVY 

SCHEDULE  OF  SUMS  granted,  and  of  the  sums  which  may  be  applied  as  appro- 
priations in  aid  in  addition  thereto,  to  defray  the  charges  of  the  NAVY 
SERVICES  herein  particularly  mentioned,  which  will  come  in  course  of 
payment  during  the  year  ending  on  the  31st  day  of  March  1913;  viz.: — 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For  wages,  &c.,  to  137,500  officers,  sea- 

men, and  boys,  coastguard,  and  royal 

marines  (including  an  additional  num- 

ber of  1500  men  and  boys  and  an  addi- 

tional sum  of  60.000/.)   .... 

7,687,000 

174,500 

2.  For  victualling  and  clothing  for  the  navy, 

including  the  cost  of  victualling  estab- 

lishments  at   home   and  abroad    (in- 

cluding an  additional  sum  of  54,OOOJ.) 

2,682,100 

731,337 

3.  For  medical  services,  including  the  cost 

of   medical   establishments   at   home 

and  abroad      

269,900 

20,065 

4.  For  martial  law  

3,500 

100 

5.  For  educational  services    .... 

152,500 

66,385 

6.  For  scientific  services         .... 

72,000 

31,789 

7.  For  the  royal  naval  reserve,  the  royal 

fleet  reserve    (including  seamen  pen- 

sioner reserve),  and  the  royal  naval 

volunteers,  &c.        

426,700 

9,732 

8.  Sect.  1.  For  the  personnel  for  shipbuild- 

ing,   repairs,    maintenance,    &c.,    in- 

cluding the  cost  of  establishments  of 

dockyards  and  naval  yards  at  home 

and  abroad  (including  an   additional 

sum  of  35.000/.)      

3,528,800 

22,000 

"    Sect.  2.  For  the  mate'riel  for  shipbuild- 

ing,   repairs,    maintenance,    &c.,    in- 

cluding the  cost  of  establishments  of 

dockyards  and  naval  yards  at  home 

and  abroad      

5,076,800 

380,300 

Carried  forward 

19,899,300 

1,436,208 

324 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward 

19,899,300 

1,436,208 

8.  Sect.   3.   For  contract   work   for   ship- 

building,  repairs,   &c.    (including   an 

additional  sum  of  611,000/.) 

13,666,600 

175,000 

9.  For  naval  armaments  (including  an  ad- 

ditional sum  of  200,00(W.)      . 

4,119,000 

145,700 

10.  For  works,  buildings,  and  repairs  at  home 

and    abroad,    including    the    cost    of 

superintendence,    purchase    of    sites, 

grants  in  aid,  and  other  charges  con- 

nected therewith  (including  an  addi- 

tional sum  of  30,000/.)   .... 

3,545,000 

32,000 

11.  For  various  miscellaneous  effective  serv- 

ices     

532,000 

13,386 

12.  For  the  Admiralty  Office  .... 

428,500 

8,850 

13.  For  half  -pay,  and  retired  pay  to  officers 

of  the  navy  and  marines 

955,800 

21,412 

14.  For  naval  and  marine  pensions,  gratui- 

ties and  compassionate  allowances     . 

1,516,200 

30,926 

15.  For  civil  superannuation,  compensation 

allowances,  and  gratuities     . 

413,000 

410 

TOTAL  NAVY  SERVICES 

45,075,400 

1,863,892 

APPENDIX  III 


SCHEDULE  (B.)— PART  4 


ARMY 

SCHEDULE  of  SUMS  granted,  and  of  the  sums  which  may  be  applied  as  appro- 
priations in  aid  in  addition  thereto,  to  defray  the  charges  of  the  ARMY 
SERVICES  herein  particularly  mentioned,  which  will  come  in  course  of 
payment  during  the  year  ending  on  the  31st  day  of  March  1913;  viz.: — 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For  the  pay,  &c.,  of  His  Majesty's  Army 

(including  Army  Reserve  to  a  number 

not  exceeding  139,000)  at  home  and 

abroad  (exclusive  of  India)   .        . 

8,536,000 

1,354,000 

2.  For  the  pay,  &c.,  of  the  medical  estab- 

lishments, and  for  medicines,  &c.  . 

436,000 

1,700 

3.  For  the  pay,  bounty,  &c.,  of  the  Special 

Reserve  (to  a  number  not  exceeding 

91,363,  including  1300  militia  and  150 

militia  reserve)   and  of  the   Officers' 

Training  Corps        

715,000 

6,600 

4.  For   grants,    pay,    allowances,    training, 

and  miscellaneous  charges  of  the  Ter- 

ritorial Force  (not  exceeding  319,673 

men,  including  5000  Territorial  Force 

Reserve),    and    Channel    Islands   and 

Colonial  Militia,  including  the  expense 

of  permanent  staff  

2,780,000 

4,800 

5.  For  establishments  for  military  education 

142,000 

89,100 

6.  For  quartering,  transport,  and  remounts 

1,624,000 

67,000 

7.  For  supplies  and  clothing 

4,275,000 

198,500 

8.  For   the   Ordnance    Department   estab- 

lishments and  for  general  stores  . 

615,000 

220,000 

9.  For  armaments,  aviation  and  engineer 

stores,    including    technical    commit- 

tees     

1,718,000 

325,000 

Carried  forward 

20,841,000 

2,266,700 

APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward    . 

20,841,000 

2,266,700 

10.  For  works,  buildings,  and  repairs,  lands, 

and   miscellaneous   engineer   services, 

including  staff  in  connection  therewith 

2,602,000 

106,900 

11.  For  miscellaneous  effective  services 

72,000 

950 

12.  For  the  War  Office     

440,000 

560 

13.  For    rewards;    half-pay;     retired    pay; 

widows'    pensions;    and    other    non- 

effective  charges  for  officers  . 

1,843,000 

515,000 

14.  For  Chelsea  and  Kilmainham  hospitals; 

for  out  pensions;  for  rewards  for  dis- 

tinguished services;  for  widows'  pen- 

sions;   and    for    other    non-effective 

charges    for    warrant    officers,    non- 

commissioned officers,  and  men,  &c.   . 

1,917,000 

524,000 

17.  For  civil  superannuation,  compensation, 

and  additional  allowances,  gratuities, 

injury  grants,  &c  

145,000 

55 

TOTAL  ARMY  SERVICES 

27,860,000 

3,414,165 

ARMY  (ORDNANCE  FACTORIES). 

For  the  ordnance  factories,  the  cost  of  pro- 

ductions of  which  is  charged  to  the  army, 

navy,  and  Indian  and  Colonial  Govern- 

100 

2,923,000 

ments,  &c  

TOTAL  ARMY  SERVICES  (INCLUDING  ORD-  1 

27,860,100 

6,337,165 

NANCE  FACTORIES)                         .     J 

APPENDIX  III 


SCHEDULE  (B.)— PART  5 

CIVIL  SERVICES.— CLASS  I 

SCHEDULE  of  SUMS  granted,  and  of  the  sums  which  may  be  applied  as 
appropriations  in  aid  in  addition  thereto,  to  defray  the  charges  of 
the  several  CIVIL  SERVICES  herein  particularly  mentioned,  which  will 
come  in  course  of  payment  during  the  year  ending  on  the  31st  day  of 
March  1913;  viz.: — 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For    expenditure    in    respect    of    royal 

palaces,  including  a  grant  in  aid  . 

71,300 

1,087 

2.  For  expenditure  in  respect  of  Osborne  . 

13,000 

2,400 

3.  For  the  royal  parks  and  pleasure  gar- 

dens   

125,700 

11,470 

4.  For  expenditure  in  respect  of  the  Houses 

of  Parliament  buildings 

50,800 

400 

5.  For  expenditure  in  respect  of  miscella- 

neous legal  buildings,  Great  Britain    . 

79,200 

600 

6.  For  expenditure  in  respect  of  Art  and 

Science  buildings,  Great  Britain  (in- 

cluding   a    supplementary    sum    of 

38.350/.)    

142,650 

2,045 

7.  For  expenditure  in  respect  of  diplomatic 

and  consular  buildings,  and  for  the 

maintenance     of     certain     cemeteries 

abroad    (including    a    supplementary 

sum  of  20,000/.)      

105,800 

1,238 

8.  For   the   Customs   and   Excise,   Inland 

Revenue,  Post  Office  and  Telegraph 

buildings  in  Great  Britain,  and  certain 

Post  Offices  abroad        .... 

725,800 

5,340 

9.  For    Labour   Exchange   and    Insurance 

buildings,  Great  Britain  (including  a 

supplementary  sum  of  135,000/.) 

350,300 

565 

10.  For  expenditure  in   respect   of  sundry 

public  buildings  in  Great  Britain  not 

provided  for  on  other  votes  . 

725,500 

12,298 

Carried  forward 

2,390,050 

37,443 

328 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward 

2,390,050 

37,443 

11.  For  the  survey  of  the  United  Kingdom, 

and    for    minor    services    connected 

therewith          

214,589 

43,475 

12.  For  maintaining  certain  harbours  under 

the  Board  of  Trade  and  for  grants  in 

aid  of  harbours       

75,065 

2,600 

13.  For  constructing  a  new  harbour  of  refuge 

at  Peterhead    

32,000 

.  . 

14.  For  rates  and  contributions  in  lieu  of 

rates,  &c.,  in  respect  of  Government 

property,  and  for  rates  on  houses  occu- 

pied  by   Representatives   of   Foreign 

Powers,  and  for  salaries  and  expenses 

of  the  Rating  of  Government  prop- 

erty department,  and  for  a  contribu- 

tion towards  the  expenses  of  the  Lon- 

don Fire  Brigade     

798,000 

33,785 

15.  For    the    erection,    repairs,    and    main- 

tenance of  public  buildings  in  Ireland, 

for  the  maintenance  of  certain  parks 

and  public  works,  and  for  the  main- 

tenance   of    drainage    works    on    the 

River  Shannon        

273,366 

7,960 

16.  For    payments    under    the    Tramways 

and  Public  Companies  (Ireland)  Act, 

1883,  &c.,  the  Railways  (Ireland)  Act, 

1896,   and   the   Marine   Works    (Ire- 

land) Act,  1902       

48,360 

TOTAL  CIVIL  SERVICES,  CLASS  I  . 

3,831,430 

125,263 

APPENDIX  III 


SCHEDULE  (B.)— PART  6 

CIVIL  SERVICES— CLASS  II 

SCHEDULE  OF  SUMS  granted,  and  of  the  sums  which  may  be  applied  as  appro- 
priations in  aid  in  addition  thereto,  to  defray  the  charges  of  the  several 
CIVIL  SERVICES  herein  particularly  mentioned,  which  will  come  in  course 
of  payment  during  the  year  ending  on  the  31st  day  of  March  1913; 
viz. : — 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For  the  salaries  and  expenses  of  the  offices 

of  the  House  of  Lords    .... 

28,741 

15,000 

2.  For   the   salaries   and   expenses   of   the 

House  of  Commons        .... 

302,850 

16,000 

3.  For  the  salaries  and  other  expenses  of 

the    department    of    His     Majesty's 

Treasury     and     subordinate     depart- 

ments, including  expenses  in  respect 

of   advances   under   the    Light    Rail- 

ways Act,  1896                        ... 

114,371 

4,344 

4.  For   the    salaries   and   expenses   of   the 

office  of  His  Majesty's  Secretary  of 

State  for  the  Home  Department  and 

subordinate  offices  

258,007 

13,500 

5.  For   the   salaries   and   expenses   of   the 

department  of   His   Majesty's  Secre- 

tary of  State  for  Foreign  Affairs  . 

68,420 

775 

6.  For   the    salaries   and   expenses   of   the 

department   of   His   Majesty's   Secre- 

tary of  State  for  the  Colonies,  includ- 

ing a  grant  in  aid  of  certain  expenses 

connected  with  Emigration  . 

60,075 

7.  For  the  salaries  and  expenses  of  the  de-. 

partment  of  His  Majesty's  most  Hon- 

ourable Privy  Council    .... 

10,646 

1,800 

8.  For  the  salaries  and  expenses  of  the  office 

of  the  Committee  of  Privy  Council  for 

Trade,  and  subordinate  departments 

(including   a   supplementary    sum   of 

3750/.)       

365,612 

26,446 

Carried  forward 

1,208,722 

77,865 

330 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward 

1,208,722 

77,865 

9.  For  the  salaries  and  expenses  of  certain 

services  transferred  from  the  Mercan- 

tile Marine  Fund  and  other  services 

connected  with  the  Mercantile  Marine 

(including  Merchant  Seamen's  Fund 

Pensions)    

109,788 

73,400 

10.  For   meeting    the  deficiency  of   income 

from  fees,  &c.,  for  the  requirements 

of    the    Board   of   Trade,   under   the 

Bankruptcy  Acts,  1883  and  1890 

8 

111,291 

11.  For   the   salaries   and   expenses   of   the 

Board   of    Agriculture    and    Fisheries 

and  of  Royal  Botanic  Gardens,  Kew, 

including  certain  grants  in  aid 

253,539 

137,580 

12.  For   the    salaries   and   expenses   of   the 

Charity  Commission  for  England  and 

Wales        

30,313 

13.  For  the   Salaries  and   Expenses  of  the 

Department  of  the  Government  Chem- 

20,633 

14.  For  the  salaries  and  expenses  of  the  Civil 

Service  Commission        .... 

55,134 

.  . 

15.  For  the  salaries  and  expenses  of  the  de- 

partment of  the  Comptroller  and  Audi- 

tor-General                     . 

67,760 

3,124 

16.  For  the  salaries  and  expenses  of  the  Regis- 

try of  Friendly  Societies 

12,122 

.. 

17.  For  the  salaries  and  expenses  of  the  Lo- 

cal Government  Board  .... 

283,374 

5,580 

18.  For  the   salaries   and   expenses   of   the 

office  of  the  Commissioners  in  Lunacy 

in  England                               .        •        • 

19,830 

962 

19.  For  the  salaries  and  expenses  of  the  Mint, 

including  the  expenses  of  coinage,  and 

for  the  expenses  of  the  preparation  of 

* 

medals,    dies   for   postage   and   other 

stamps,  and  His  Majesty's  seals  . 

50 

161,000 

20.  For  the  salaries  and  expenses  of  the  Na- 

tional Debt  Office  ' 

12,580 

3,177 

Carried  forward 

2,073,853 

573,979 

331 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward     . 

2,073,853 

573,979 

21.  For  the  salaries  and  expenses  of  the  Pub- 

lic Record  Office  and  of  the  Office  of 

Land    Revenue    Records    and    Inrol- 

ments        .       .       .       . 

25,320 

22.  For   the   salaries   and   expenses  of   the 

establishment  under  the  Public  Works 

Loan  Commissioners      .... 

34 

11,800 

23.  For  the  salaries  and  expenses  of  the  de- 

partment of  the  Registrar-General  of 

Births,  &c.,  in  England 

60,405 

10,250 

24.  For  stationery,  printing,  paper,  binding, 

and  printed  books  for  the  public  serv- 

ice, for  the  salaries  and  expenses  of 

the  Stationery  Office,  and  for  sundry 

miscellaneous    services,    including   re- 

ports of  Parliamentary  Debates  . 

959,751 

140,000 

25.  For  the  salaries  and  expenses  in  the  office 

of  His  Majesty's  Woods,  Forests,  and 

Land  Revenues       

21,380 

.  . 

26.  For   the   salaries   and   expenses   of   the 

office   of   the    Commissioners   of    His 

Majesty's  Works  and   Public  Build- 

ings     

136,750 

.  . 

27.  For   His   Majesty's   foreign   and   other 

secret  services          

50,000 

28.  For   the   salaries   and   expenses   of   the 

office  of  His  Majesty's  Secretary  for 

Scotland  and  subordinate  offices,  ex- 

penses under  the  Inebriates  Acts,  1879 

to     1900,    and    expenses    under    the 

Private  Legislation  Procedure   (Scot- 

land) Act,  1899       

17,126 

2,010 

29.  For  the   salaries   and   expenses  of   the 

Board  of  Agriculture  for  Scotland 

209,580 

5,000 

30.  For   the   salaries   and   expenses   of   the 

Fishery  Board  for  Scotland,  and  for 

grants  in  aid  of  piers  or  quays 

24,428 

31.  For   the   salaries   and   expenses  of  the 

Board  of  Lunacy  in  Scotland 

6,123 

520 

Carried  forward 

3,584,750 

743,559 

332 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward 

3,584,750 

743,559 

32.  For  the   salaries  and   expenses  of  the 

department  of  the  Registrar-General 

of  Births,  &c.,  in  Scotland    . 

8,356 

1,300 

33.  For  the   salaries  and   expenses   of   the 

Local  Government  Board  for  Scotland 

20,418 

.  . 

34.  For   the   salaries  and   expenses  of   the 

household  of  the  Lord-Lieutenant  of 

Ireland     

4,552 

.  . 

35.  For  the   salaries  and   expenses  of  the 

offices  of  the  Chief  Secretary  to  the 

Lord-Lieutenant  of  Ireland,  in  Dublin 

and  London,   and  of  the  Inspectors 

of    Lunatic    Asylums,    and    expenses 

under  the  Inebriates  Acts     .  j 

27,296 

307 

36.  For  the   salaries   and   expenses  of   the 

department  of  agriculture  and  other 

industries,    and   technical   instruction 

for  Ireland,  and  of  the  services  admin- 

istered by  that  department,  including 

sundry  grants  in  aid       .... 

136,314 

57,481 

37.  For  the   salaries  and   expenses  of  the 

office  of  the  Commissioners  of  Char- 

itable   Donations   and    Bequests   for 

2,052 

34 

38.  For  the  Congested  Districts  Board  for 

Ireland  (Grants-in-Aid) 

169,750 

39.  For   the  salaries   and  expenses   of  the 

Local  Government  Board  in  Ireland, 

including  sundry  grants  in  aid 

111,688 

13,000 

40.  For   the   salaries   and   expenses   of   the 

Public  Record  Office  in  Ireland  and  of 

the  Keeper  of  State  Papers  in  Dublin 

7,446 

41.  For   the   salaries   and   expenses   of   the 

Office  of  Public  Works  in  Ireland 

46,969 

3,000 

42.  For   the   salaries  and  expenses  of  the 

department  of  the  Registrar-General 

of  Births,  &c.,  and  for  the  expenses 

of  collecting  emigration  statistics  in 

Ireland     

20,258 

800 

Carried  forward 

4,139,849 

819,481 

333 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 
43. 

Brought  forward 
For  the   salaries  and   expenses   of  the 
general  valuation  and  boundary  survey 
of  Ireland         ...... 

TOTAL  CIVIL  SERVICES,  CLASS  II. 

£ 

4,139,849 
42,295 

£ 
819,481 

9,000 

4,182,144 

828,481 

APPENDIX  III 


SCHEDULE  (B.)— PART  7 

CIVIL  SERVICES.— CLASS  III 

SCHEDULE  OF  SUMS  granted,  and  of  the  sums  which  may  be  applied  as  appro- 
priations in  aid  in  addition  thereto,  to  defray  the  charges  of  the  several 
CIVIL  SERVICES  herein  particularly  mentioned,  which  will  come  in  course 
of  payment  during  the  year  ending  on  the  31st  day  of  March  1913; 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For  the  salaries  of  the  law  officers  de- 

partment, the  salaries  and  expenses  of 

the   department   of  the   Solicitor  for 

the  affairs  of  His  Majesty's  Treasury 

and  King's  Proctor,  and  the  depart- 

ment of  Director  of  Public  Prosecu- 

tions, for  the  costs  of  prosecutions,  of 

• 

other  legal  proceedings,  and  of  Par- 

liamentary Agency         .... 

83,812 

19,000 

2.  For  certain  miscellaneous  legal  expenses, 

including  grants  in  aid  of  the  expenses 

of  the  Incorporated  Law  Societies  of 

England  and  Ireland      .... 

50,194 

12,731 

3.  For  such  of  the  salaries  and  expenses  of 

the  Supreme  Court  of  Judicature  and 

Court  of  Criminal  Appeal  as  are  not 

charged  on  the  Consolidated  Fund 

330,632 

51,700 

4.  For  the   salaries   and   expenses  of  the 

office  of  Land  Registry  .... 

36,471 

5.  For   the   salaries   and   expenses  of   the 

office  of  Public  Trustee 

10 

29,990 

6.  For  the  salaries  and  expenses  connected 

with  the  County  Courts 

5 

499,352 

Carried  forward 

501,124 

612,773 

335 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward 

501,124 

612,773 

7.  For  the  salaries  of  the   Commissioner 

and  Assistant  Commissioners  of  the 

Metropolitan  Police,  and  of  the  Re- 

ceiver   for    the    Metropolitan    Police 

District,     the    contribution    towards 

the    expenses    of    the    Metropolitan 

Police,  and  the  salaries  and  expenses 

of  the  Inspectors  of  Constabulary     . 

126,998 

77 

8.  For  the  expenses  of  the  prisons  in  Eng- 

land, Wales,  and  the  Colonies 

776,550 

25,000 

9.  For   the   salaries   and   expenses   of   the 

office  of   the   Inspector  of  Reforma- 

tories   and    for    the    maintenance    of 

juvenile  offenders  in  reformatory,  in- 

dustrial,  and   day   industrial   schools 

and  in  places  of  detention  under  the 

Children  Act,  in  Great  Britain     . 

277,474 

25,000 

10.  For  the  maintenance  of  criminal  lunatics 

in  the  Criminal  Lunatic  Asylums  at 

Broadmoor  and   Rampton,   including 

the     furnishing     and     equipment     of 

Rampton  Asylum   

83,154 

1,216 

11.  For  the  salaries  and  expenses  of  the  Lord 

Advocate's  department  and  other  law 

charges,  and  the  salaries  and  expenses 

of^the  Courts  of  Law  and  Justice  in 

Scotland   

87,373 

49,300 

12.rFor  the  salaries  and  expenses  of  the  office 

of  the  Scottish  Land  Court  . 

11,600 

.  . 

13.  For  the  salaries  and  expenses  of  the  offices 

in    His    Majesty's    General    Register 

House,  Edinburgh  

43,966 

.  . 

14.  For  the  salaries  and   expenses  of  the 

Prison    Commissioners   for    Scotland, 

and  of  the  prisons  under  their  con- 

trol,   including    the    maintenance    of 

criminal  lunatics  and  inmates  of  the 

State  inebriate  reformatory,  and  the 

preparation  of  judicial  statistics  . 

101,776 

5,800 

Carried  forward 

2,010,015 

719.166 

336 


APPENDIX  III 


Stuns  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward 

2,010,015 

719,166 

15.  For  criminal  prosecutions  and  other  law 

charges  in  Ireland,  including  a  Grant 

in  relief  of  certain  expenses  payable 

by  statute  out  of  local  rates 

65,410 

490 

16.  For  such  of  the  salaries  and  expenses  of 

the  Supreme  Court  of  Judicature  and 

of  certain  other  legal  departments  in 

Ireland  as  are  not  charged  on  the  Con- 

solidated Fund        

113,135 

3,900 

17.  For  the  salaries  and  expenses  of  the  office 

of  the  Irish  Land  Commission     . 

616,147 

24,500 

18.  For  the  salaries,  allowances,  and  expenses 

of  various   county  court  officers,  and 

of  magistrates  in  Ireland,  and  the  ex- 

penses of  revision    

111,145 

5,200 

19.  For  the  salaries  and  expenses  of  the  Com- 

missioner of  Police,  the  police  courts 

i 

and  the  metropolitan  police  establish- 

96,466 

56,715 

20.  For  the  expenses  of  the  Royal  Irish  Con- 

1,377,389 

35,680 

21.  For  the  expenses  of  the  General  Prisons 

Board  in  Ireland,  and  of  the  establish- 

ments under  their  control;  the  regis- 

tration of  habitual  criminals  and  the 

maintenance  of  criminal  lunatics  con- 

fined in  district  lunatic  asylums     . 

112,439 

3,500 

22.  For  the  expenses  of  reformatory  and  in- 

dustrial schools  in  Ireland     . 

111,912 

1,950 

23.  For  the  maintenance  of  criminal  lunatics 

in    the    Dundrum    Criminal    Lunatic 

7,477 

TOTAL  CIVIL  SERVICES,  CLASS  III.  . 

4,621,535 

851,101 

APPENDIX  III 


SCHEDULE  (B.)— PART  8 

CIVIL  SERVICES.— CLASS  IV 

SCHEDULE  of  SUMS  granted,  and  of  the  sums  which  may  be  applied  as 
appropriations  in  aid  in  addition  thereto,  to  defray  the  charges  of  the 
several  CIVIL  SERVICES  herein  particularly  mentioned,  which  will  come 
in  course  of  payment  during  the  year  ending  on  the  31st  day  of  March 
1913;  viz.:— 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For  the  salaries  and  expenses  of  the  Board 

of  Education,  and  of  the  various  es- 

tablishments connected  therewith,  in- 

cluding sundry  grants  in  aid  (includ- 

ing a  supplementary  sum  of  15,000/.)    . 

14,519,765 

10,100 

2.  For  the  salaries  and  other  expenses  of 

the  British  Museum,  and  of  the  Nat- 

ural History  Museum,  including  cer- 

tain grants  in  aid     

204,071 

16,019 

3.  For   the   salaries   and   expenses   of   the 

National  Gallery,  and  of  the  National 

Gallery  of  British  Art,  Millbank,  in- 

cluding a  grant  in  aid  for  the  pur- 

chase of  pictures     

14,445 

2,500 

4.  For  the   salaries  and   expenses  of   the 

National   Portrait.  Gallery,   including 

a  grant  in  aid  for  the  purchase  of  por- 

traits          

5,681 

5.  For  the  salaries  and  expenses  of  the  Wal- 

lace Collection         

8,511 

660 

6.  For  sundry  grants  in  aid  of  scientific  in- 

vestigation, &c.,  and  other  grants 

125,523 

.  . 

7.  For  grants  in  aid  of  the  expenses  of  cer- 

tain Universities  and  Colleges  in  Great 

Britain  and  of  the  expenses  under  the 

Welsh  Intermediate    Education   Act, 

1889  

314,200 

Carried  forward 

15,192,196 

29,279 

338 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward 

15,192,196 

29,279 

8.  For  public  education  in  Scotland,  and 

for  Science  and  Art  in  Scotland,  in- 

cluding a  grant  in  aid    .... 

2,489,425 

^  m 

9.  For   the   salaries   and   expenses  of   the 

National    Gallery,    the    Scottish    Na- 

tional Portrait  Gallery,  and  the  Mu- 

seum of  Antiquities,  including  certain 

grants  in  aid    

6,598 

•  • 

10.  For  the  expenses  of  the  Commissioners 

of  National  Education  in  Ireland,  in- 

cluding a  grant  in  aid  of  the  Teachers 

Pension   Fund,    Ireland    (including   a 

supplementary    sum    of    10,000/.    for 

expenses   of   scholarships   tenable   by 

pupils  from  primary  schools  in  Ire- 

land)          

1,744,554 

150 

11.  For  the  expenses  of  the  Office  of  the 

Commissioners  for  managing  certain 

school  endowments  in  Ireland 

935 

.  . 

12.  For   the   salaries   and   expenses   of   the 

National  Gallery  of   Ireland,  includ- 

ing a  grant  in  aid  for  the  purchase  of 

pictures     

3,155 

13.  For   the   salaries   and   expenses   of  the 

Institutions    of    Science   and    Art    in 

Dublin,   and  of    the   Geological   Sur- 

vey of   Ireland,   and  Annual   Grants 

to  Schools  and  Classes  of  Science  and 

Art  and  Technical  Instruction,  includ- 

ing sundry  Grants  in  Aid,  adminis- 

tered by  the  Department  of  Agricul- 

ture   and    Technical    Instruction    for 

I 

138,591 

1,345 

14.  For  grants  under  the  Irish  Universities 

Act   1908         

130,000 

TOTAL  CIVIL  SERVICES,  CLASS  IV.  . 

19,705,454 

30,774 

APPENDIX  III 


SCHEDULE  (B.)— PART  9 

CIVIL  SERVICES.— CLASS  V 

SCHEDULE  of  SUMS  granted,  and  of  the  sums  which  may  be  applied  as 
appropriations  in  aid  in  addition  thereto,  to  defray  the  charges  of  the 
several  CIVIL  SERVICES  herein  particularly  mentioned,  which  will  come 
in  course  of  payment  during  the  year  ending  on  the  31st  day  of 
March  1913;  viz.:— 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For   the   expenses   in   connection   with 

His    Majesty's    embassies,    missions, 

and  consular  establishments  abroad, 

and  other  expenditure  chargeable  to 

the  Consular  Vote  

689,040 

101,820 

2.  For  sundry  colonial  services,  including 

certain    grants    in    aid    (including    a 

supplementary  sum  of  503,000/.) 

1,363,754 

3.  For  the  subsidies  to  certain  Telegraph 

Companies,  and  a  grant  in  aid  of  the 

annual  expenses  of  the  Pacific  Cable  . 

39,974 

36,546 

4.  For  a  grant  in  aid  of  the  Revenue  of  the 

Island  of  Cyprus     

50,000 

TOTAL  CIVIL  SERVICES,  CLASS  V. 

2,142,768 

138,366 

APPENDIX  III 


SCHEDULE  (B.)— PART  10 

CIVIL  SERVICES.— CLASS  VI 

SCHEDULE  of  SUMS  granted,  and  of  the  sums  which  may  be  applied  as 
appropriations  in  aid  in  addition  thereto,  to  defray  the  charges  of  the 
several  CIVIL  SERVICES  herein  particularly  mentioned,  which  will 
come  in  course  of  payment  during  the  year  ending  on  the  31st  day  of 
March  1913;  viz. : — 


Sums  not  exceeding 


Supply  Grants. 


Appropriations 
in  Aid. 


No 
1. 


For  superannuation,  compensation,  com- 
passionate, and  additional  allowances, 
and  gratuities  under  sundry  Statutes, 
for  compassionate  allowances  and  grat- 
uities awarded  by  the  Treasury;  and 
for  the  salaries  of  medical  referees  . 

2.  For  certain  miscellaneous  charitable  and 

other  allowances,  Great  Britain   . 

3.  For  hospitals  and  infirmaries  and  certain 

miscellaneous  charitable  and  other  al- 
lowances in  Ireland,  including  sundry 
grants  in  aid 

4.  For  making  good  the  deficiency  on  the 

Income  Account  of  the  Fund  for 
Friendly  Societies 

5.  For  Old  Age  Pensions  in  the  United  King- 

dom, and  for  certain  administrative 
expenses  in  connection  therewith 

6.  For  compensation  to  the  Registrar  and 

Staff  at  Stationers'  Hall  on  the  aboli- 
tion of  the  office  of  Registrar 

TOTAL  CIVIL  SERVICES,  CLASS  VI.  . 


778,253 
1,439 

16,883 

14,426 

12,200,000 

3,563 


13,014,564 


APPENDIX  III 


SCHEDULE   (B.)— PART  11 


CIVIL  SERVICES.— CLASS  VII 

SCHEDULE  of  SUMS  granted,  and  of  the  sums  which  may  be  applied  as 
appropriations  in  aid  in  addition  thereto,  to  defray  the  charges  of  the 
several  CIVIL  SERVICES  herein  particularly  mentioned,  which  will  come 
in  course  of  payment  during  the  year  ending  on  the  31st  day  of 
March  1913;  viz.: — 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For  the  salaries  and  other  expenses  of 

temporary   commissions,    committees, 

and  special  inquiries       .... 

33,000 

2.  For  certain  miscellaneous  expenses 

13,742 

7,250 

3.  For  making  good  certain  sums  written 

off  from  the  assets  of  the  Local  Loans 

Fund         

3,418 

.  . 

4.  For    the    Ireland    Development    Grant 

(Grant  in  Aid)         

185,000 

.  . 

5.  For  a  grant  in  aid  of  the  Government 

Hospitality  Fund  

10,000 

.  . 

6.  For  expenditure  in  connection  with  the 

International  Exhibition  at  Ghent  in 

1913  

30,000 

.  . 

7.  For  the  repayment  to  the  Civil  Con- 

tingencies Fund  of  certain  miscellane- 

ous advances    

5,539 

.  . 

8.  For  contributions  in  aid  of  expenses  un- 

der the  Unemployed  Workmen  Act, 

1905  .       .      '  .       .       .       .       .       . 

100,000 

TOTAL  CIVIL  SERVICES,  CLASS  VII.     . 

380,699 

7,250 

APPENDIX  III 


SCHEDULE  (B.)— PART  12 

CIVIL  SERVICES.— CLASS  VIII 

SCHEDULE  of  SUMS  granted,  and  of  the  sums  which  may  be  applied  as 
appropriations  in  aid  in  addition  thereto,  to  defray  the  charges  of 
the  several  CIVIL  SERVICES  herein  particularly  mentioned,  which  will 
come  in  course  of  payment  during  the  year  ending  on  the  31st  day  of 
March  1913;  viz.: — 


Sums  not  exceeding 


Supply  Grants. 


Appropriations 
in  Aid. 


No. 

1.  For   the   salaries  and   expenses  of  the 

National  Health  Insurance  Joint  Com- 
mittee   

2.  For  the  salaries  and  expenses  of  the  In- 

surance Commission  (England),  for 
contributions  under  Part  I.  of  the 
National  Insurance  Act,  1911,  and 
for  grants  in  aid  of  expenditure  in- 
curred out  of  the  National  Health 
Insurance  Fund  in  respect  of  benefits 
and  expenses  of  administration  under 
that  Part  of  that  Act  (including  cer- 
tain special  grants  towards  the  ex- 
penses of  Insurance  Committees)  (in- 
cluding a  supplementary  sum  of 
42.500/.) 

3.  For  the  salaries  and  expenses  of  the  In- 

surance Commission  (Wales),  for  con- 
tributions under  Part  I.  of  the  Na- 
tional Insurance  Act,  1911,  and  for 
grants  in  aid  of  expenditure  incurred 
out  of  the  Welsh  National  Health  In- 
surance Fund  in  respect  of  benefits  and 
expenses  of  administration  under  that 
Part  of  that  Act  (including  certain 
special  grants  towards  the  expenses  of 
Insurance  Committees)  (including  a 
supplementary  sum  of  28,350/.)  . 


Carried  forward 


37,570 


1,560,145 


129,510 


1,727,225 


343 


APPENDIX  III 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

Brought  forward 

1,727,225 

.  . 

4.  For  the   salaries  and   expenses   of   the 

Insurance  Commission  (Scotland),  for 

contributions   under    Part    I.  of   the 

National  Insurance  Act,  1911,  and  for 

grants  in  aid  of  expenditure  incurred 

out  of  the  Scottish  National  Health 

Insurance  Fund  in  respect  of  benefits 

and    of    expenses    of    administration 

under  that  Part  of  that  Act  (including 

certain    special    grants    towards    the 

expenses   of    Insurance    Committees) 

(including    a  supplementary  sum  of 

10.000/.)    

244,510 

•  • 

5.  For  the  salaries  and   expenses   of  the 

Insurance  Commission   (Ireland),  for 

contributions   under   Part   I.   of   the 

< 

National  Insurance  Act,  1911,  and  for 

grants  in  aid  of  expenditure  incurred 

out  of  the  Irish  National  Health  In- 

• 

surance  Fund  in  respect  of  benefits 

and    of    expenses    of    administration 

under  that  Part  of  that  Act  (including 

certain    special    grants    towards    the 

expenses    of    Insurance    Committees) 

(including   a   supplementary   sum   of 

18,100*.)    

168,140 

•  • 

6.  For  the  salaries  of  the  staff  and  other 

expenses   of    Labour    Exchangesi    in- 

cluding the  contribution  to  the  Unem- 

ployment Insurance  Fund     . 

804,037 

202,500 

7.  For  the  salaries   and   expenses  of   the 

Audit  Staff  under  Part  I.  of  the  Na- 

tional Insurance  Act,  1911    . 

51,757 

.  . 

8.  For  grants  to  Friendly  Societies,  &c.,  in 

aid    of    the    expenses    of    preparing 

schemes  under  section  72  of  the  Na- 

tional Insurance  Act,  1911    . 

47,000 

•• 

TOTAL  CIVIL  SERVICES,  CLASS  VIII   . 

3,042,669 

202,500 

344 


APPENDIX  III 


SCHEDULE  (B.)— PART  13 

REVENUE  DEPARTMENTS,  &c. 

SCHEDULE  of  SUMS  granted,  and  of  the  sums  which  may  be  applied  as 
appropriations  in  aid  in  addition  thereto,  to  defray  the  charges  of 
the  several  REVENUE  DEPARTMENTS,  &c.,  herein  particularly  men- 
tioned, which  will  come  in  course  of  payment  during  the  year  ending 
on  the  31st  day  of  March  1913;  viz.: — 


Sums  not  exceeding 

Supply  Grants. 

Appropriations 
in  Aid. 

No. 

£ 

£ 

1.  For  the  salaries  and  expenses  of  the 

Customs  and  Excise  Department 

2,357,900 

93,770 

2.  For  the  salaries  and  expenses  of  the  In- 

land Revenue  Department    . 

1,895,830 

10,000 

3.  For  the  salaries  and  expenses  of  the  Post 

Office,  including  Telegraphs  and  Tele- 

phones       

23,808,950 

631,193 

TOTAL  REVENUE  DEPARTMENTS  . 

28,062,680 

734,963 

APPENDIX  III 


SCHEDULE  (C.) 


No.  of 
Vote. 

NAVY  SERVICES.  1910-11. 
VOTES. 

Surpluses. 

Deficits  made  good 
from  Surpluses. 

£         s.    d. 

£         s.    d. 

1 

Wages,  &c.,  of  officers,  seamen, 

and   boys,    Coastguard,    and 

Royal  Marines 

31,281  10  11 

,  . 

2 

Victualling  and  clothing  for  the 

Navy         

18,204  15     6 

3 

Medical  establishments  and  serv- 

ices   ...... 

11,644  15     7 

4 

Martial  law          .... 

1,766    6     1 

" 

5 

Educational  services  .        . 

6,486    4     1 

6 

Scientific  services 

1,080  15    4 

7 

Royal  Naval  Reserves 

9,597  12     6 

8 

Shipbuilding,    repairs,    mainte- 

nance, &c.  : 

I.  Personnel 

6,858     5     5 

II.  Materiel 

139,306     5     8 

.  . 

III.  Contract  work 

99,824  17     8 

9 

Naval  armaments 

36,512     7    6 

10 

Works,  buildings,  and  repairs, 

at  home  and  abroad 

18,260  14    9 

11 

Miscellaneous  effective  services 

63,485    6     2 

12 

Admiralty  Office 

4,946  13     0 

13 

Half  -pay  and  retired  pay  . 

17,735  19     7 

14 

Naval    and    marine    pensions, 

gratuities,  and  compassionate 

allowances        .... 

8,528    3     9 

15 

Civil  superannuation,  compen- 

sation allowances,  and  gratu- 

ities    

14,292     4    2 

a 

Amount  written  off  as  irrecov- 

erable         

1,272     6     1 

Total  .... 

337,724  12  11 

153,360  10  10 

Add  Excess  Vote 

100    0     0 

337,824  12  11 

153,360  10  10 

NET  SURPLUS 

£184,464    2     1 

APPENDIX  III 


SCHEDULE  (C.) 


No.  of 
Vote. 

ARMY  SERVICES,  1910-11. 
VOTES. 

Surpluses. 

Deficits  made  good 
from  Surpluses. 

£          s.    d. 

£          s.     d. 

1 

Pay,  &c.,  of  the  Army 

10,528  18    8 

2 

Medical    establishment:     Pay, 

&c  

4,415  17  10 

.  . 

3 

Special  Reserves 

26,477    6    8 

4 

Territorial  Force 

109,200    6  11 

.  . 

5 

Establishments  for  military  ed- 

ucation       

2,089     1     9 

6 

Quartering,  transport,  and  re- 

mounts       

12,470    5     1 

7 

Supplies  and  clothing 

98,235    4    8 

8 

Ordnance  department  establish- 

ments and  general  stores 

13,879  18    3 

9 

Armaments  and  engineer  stores 

69,570  11  11 

10 

Works  and  buildings  . 

80,948     1     2 

11 

Miscellaneous  effective  services 

5,190     7    8 

12 

War  Office    

3,502     1    0 

13 

Non-effective  charges  for  offi- 

cers, &c  

3,281     2    3 

14 

Non-effective  charges  for  men, 

&c  

3,231  10    2 

15 

Civil  superannuation,  compen- 

sation, and  gratuities 

2,060  18  11 

Balances      irrecoverable      and 

claims  abandoned   . 

•• 

3,779  15     7 

Total  .... 

329,734  19  10 

119,126    8    8 

NET  SURPLUS 

£210,608  11     2 

APPENDIX  IV1 

FORMS  AUTHORISING  AND  GRANTING  CREDITS  AND  EX- 
CHEQUER  ISSUES 

FORM  No.  1 

TREASURY  REQUISITION  authorising  CREDITS  for  CONSOLIDATED 
FUND  SERVICES 

CONSOLIDATED  FUND  SERVICES 

Quarter  to 19... 

By  virtue  of  the  Exchequer  and  Audit  Departments  Act,  1866  (29  &  30 
Viet.  c.  39,  s.  13):  We  authorise  and  require  you  to  grant  to  the  Lords  Com- 
missioners of  His  Majesty's  Treasury  for  the  time  being  on  account  of  the 

charge  of  the  Consolidated  Fund  for  the  Quarter  ended 19. . ., 

remaining  unpaid  at  that  date,  Credits  on  the  Accounts  of  his  Majesty's 
Exchequer  at  the  Bank  of  England  and  Bank  of  Ireland,  or  on  the  growing 
Balances  thereof,  for  the  following  sums,  viz.: — 

At  the  Bank  of  England    ...     £ 
At  the  Bank  of  Ireland  £ 


To  be  signed  by  Two  Lords  of 
the  Treasury. 


Treasury  Chambers,  Whitehall, 


To  the  Comptroller  and  Auditor  General. 

1  The  forms,  arranged  in  a  different  order,  are  to  be  found  in  Arson,  Law  and  Customs  of  the 
Constitution,  4th  ed.,  vol.  i.  pp.  316-322. 

348 


APPENDIX  IV 


FORM  No.  2 

GRANT  OF  CREDIT  by  the  COMPTROLLER  and  AUDITOR  GENERAL  for  SERVICES 
payable  out  of  the  CONSOLIDATED  FUND 

CREDIT  FOR  CONSOLIDATED  FUND  SERVICES 


Quarter  to 19... 

By  virtue  of  the  Exchequer  and  Audit  Departments  Act,  1866  (29  &  30 
Viet.  c.  39,  s.  13),  and  of  a  requisition  from  the  Lords  Commissioners  of  His 
Majesty's  Treasury,  authorising  the  same:  I  hereby  grant  a  Credit  to  the 
Lords  Commissioners  of  His  Majesty's  Treasury  for  the  time  being,  on  the 

account  of  His  Majesty's  Exchequer  at  the  Bank  of ,  or  on  the 

growing  Balance  thereof,  to  the  amount  of on  account  of  the 

charge  of  the  Consolidated  Fund  in  Great  Britain  (or  Ireland,  as  the  case 

may  be),  for  the  Quarter  ended 19. .,  remaining  unpaid  at 

that  date. 

Exchequer  and  Audit  Department,  "1 

19...  J 

Comptroller  and  Auditor  General. 

To  the  Governor  and  Company! 
of  the  Bank  of / 


FORM  No.  3 

TREASURY    REQUISITION    authorising    CREDITS   for    CONSOLIDATED    FUND 
SERVICES,  payable  out  of  the  GROWING  PRODUCE 

CONSOLIDATED  FUND  SERVICES 
GROWING  PRODUCE 

By  virtue  of  the  Exchequer  and  Audit  Departments  Act,  1866  (29  &  30 
Viet.  c.  39,  s.  13) :  We  authorise  and  require  you  to  grant  to  the  Lords  Com- 
missioners of  His  Majesty's  Treasury  for  the  time  being,  a  Credit  on  the 

Account  of  His  Majesty's  Exchequer  at  the  Bank  of ,  for 

the  sum  of  £ ,  to  provide  for  Issues  required  for  the  following 

349 


APPENDIX  IV 


Services,  payable  out  of  the  Growing  Produce  of  the  Consolidated  Fund,  in 


Sgrvice. 

Act. 

Amount. 

To  be  signed  by  Two  Lords  of  the 
Treasury. 


Treasury  Chambers,  Whitehall, 
..19.. 


To  the  Comptroller  and  Auditor  General. 


FORM  No.  4 

GRANT  of  CREDIT  by  the  COMPTROLLER  AND  AUDITOR  GENERAL  for  SERVICES 
payable  out  of  the  GROWING  PRODUCE  of  the  CONSOLIDATED  FUND 

CREDIT  FOR  CONSOLIDATED  FUND  SERVICES 


By  virtue  of  the  Exchequer  and  Audit  Departments  Act,  1866  (29  &  30 
Viet.  c.  39,  s.  13),  and  of  a  Requisition  from  the  Lords  Commissioners  of 
His  Majesty's  Treasury,  authorising  the  same:  I  hereby  grant  a  Credit  to 
the  Lords  Commissioners  of  His  Majesty's  Treasury  for  the  time  being,  on 

the  Account  of  His  Majesty's  Exchequer  at  the  Bank  of or 

on  the  growing  Balance  thereof,  to  the  Amount  of ,  to  provide 

for  Services  payable  out  of  the  GROWING  PRODUCE  of  the  Consolidated  Fund 
in  Great  Britain  (or  Ireland,  as  the  case  may  be)  in  the  current  Quarter 
ending 19 ... 


Exchequer  and  Audit  Department 
..19.. 


To  the  Governor  and  Company  1 
of  the  Bank  of J 


Comptroller  and  Auditor  General. 


350 


APPENDIX  IV 


FORM  No.  5 

TREASURY  ORDER  for  Issues  from  the  EXCHEQUER  ACCOUNT  for  CONSOLI- 
DATED FUND  SERVICES 

CONSOLIDATED  FUND  SERVICES 


Quarter  to 19. .. 


Treasury,  Whitehall, 
..19.. 


GENTLEMEN, 


Under  the  authority  of  the  Exchequer  and  Audit  Departments  Act, 
1866  (29  &  30  Viet.  c.  39,  s.  13),  and  of  the  Credit  granted  to  the  Lords  Com- 
missioners of  His  Majesty's  Treasury,  by  the  Comptroller  and  Auditor 

General  on  the  Account  of  His  Majesty 's  Exchequer  at  the  Bank  of , 

under  the  provisions  of  the  said  Act:  I  am  commanded  by  the  Lords  Com- 
missioners of  His  Majesty's  Treasury  to  request  that  you  will  transfer  the 
following  sums,  on  the  . .  instant,  from  the  said  Account  to  the  "Supply 
Account"  of  [His  Majesty's  Paymaster  General1]  in  your  books,  on  account 
of  the  charge  of  the  Consolidated  Fund  in  [Great  Britain2]  for  the  above- 
mentioned  Quarter. 


Service. 


Amount. 


I  am  to  request  that  when  these  sums  have  been  transferred  accordingly, 
you  will  transmit  this  authority  to  the  Comptroller  and  Auditor  General. 


I  am,  &c. 


To  be  signed  by  one  of  the} 
Secretaries  of  the  Treasury. ) 

To  the  Governor  and  Company  1 
of  the  Bank  of J 


*  [or  of  such  other  Principal  Accountants  as  the  case  may  require.] 
1  [or  Ireland.] 

351 


APPENDIX  IV 

FORM  No.  6 

ROYAL  ORDER  for  PUBLIC  SUPPLY  SERVICES 
(For  His  Majesty's  Royal  Sign  Manual) 

ROYAL  ORDER 

SUPPLY  SERVICES 

WHEREAS  the  several  sums  mentioned  in  the  Schedule  hereunto  annexed 
have  been  granted  to  Us  (by  Act,  or  by  Resolution  of  the  House  of  Commons, 
as  the  case  may  be)  to  defray  the  expenses  of  the  Public  Supply  Services  therein 
specified,  which  will  come  in  course  of  payment  in  the  year  ending  the  31st 
March  19. .:  OUR  WILL  AND  PLEASURE  is,  that  you  do,  from  time  to  time, 
authorise  the  Governor  and  Company  of  the  Bank  of  England,  or  the  Governor 
and  Company  of  the  Bank  of  Ireland,  to  issue  or  transfer  from  the  Account 
of  our  Exchequer  at  the  said  Banks  to  the  Accounts  of  the  persons  charged 
with  the  payment  of  the  said  Services,  such  sums  as  may  be  required,  from 
time  to  time,  for  the  payment  of  the  same,  not  exceeding  the  amounts  re- 
spectively stated  in  the  said  annexed  Schedule. 

Provided  that  such  issues  or  transfers  shall  be  made  out  of  the  Credits 
granted  or  to  be  granted  to  you,  from  time  to  time,  on  the  Account  of  Our 
Exchequer  at  the  said  Banks,  by  the  Comptroller  and  Auditor  General,  under 
the  authority  of  the  Exchequer  and  Audit  Departments  Act,  1866  (29  &  30 
Viet.  c.  39,  s.  15),  and  shall  not  exceed  in  the  whole  the  amount  of  the  Credits 
so  granted  out  of  the  Ways  and  Means  appropriated  by  Parliament  to  the 
Service  of  the  said  year. 

Given  at  Our  Court  at this day 

of 19... 

By  His  Majesty's  Command, 


To  be  countersigned  by  Two 
Lords  of  the  Treasury. 


To  the  Commissioners  of  Our  Treasury. 

SCHEDULE. 


Supply  Service  for  which  Valued  or  Granted. 

Amount. 

£           8.       d. 

352 


APPENDIX  IV 


FORM  No.  7 

TREASURY  REQUISITION  authorising  CREDITS  for  SUPPLY 
SERVICES 

SUPPLY  SERVICES 

Year  19... 

By  virtue  of  the  Exchequer  and  Audit  Departments  Act,  1866  (29  &  30 
Viet.  c.  39,  s.  15): — We  authorise  and  require  you  to  grant  to  the  Lords  Com- 
missioners of  His  Majesty's  Treasury  for  the  time  being,  on  account  of  the 
Ways  and  Means  granted  for  the  service  of  the  year  ending  31st  March  19. ., 
Credit  on  the  Account  of  His  Majesty's  Exchequer  at  the  Bank  of  England 
and  Bank  of  Ireland,  or  on  the  growing  Balances  thereof,  for  the  following 
sums;  viz.: — 

At  the  Bank  of  England    ...     £ 

At  the  Bank  of  Ireland      ...     £ 

Treasury  Chambers,  Whitehall, 

..19.. 


To  be  signed  by  Two  Lords 
of  the  Treasury. 


To  the  Comptroller  and  Auditor  General. 


FORM  No.  8 


CREDIT  FOR  SUPPLY  SERVICES 

Year  19... 

By  virtue  of  the  Exchequer  and  Audit  Departments  Act,  1866  (29  &  30 
Viet.  c.  39,  s.  15),  and  of  a  Requisition  from  the  Lords  Commissioners  of 
His  Majesty's  Treasury  authorising  the  same:  I  hereby  grant  a  Credit  to 
the  Lords  Commissioners  of  His  Majesty's  Treasury  for  the  time  being,  on 

the  Account  of  His  Majesty's  Exchequer  at  the  Bank  of or 

on  the  growing  Balance  thereof,  to  the  Amount  of 

353 


APPENDIX  IV 

on  account  of  the  Ways  and  Means  granted  for  the  Service  of  the  year 
ending  31st  March  19. .. 

Exchequer  and  Audit  Department,  1 

19...  J 

Comptroller  and  Auditor  General. 


To  the  Governor  and  Company 
the  Bank  of. . 


1 


FORM  No.  9 

TREASURY  ORDER  for  ISSUES  from  the  EXCHEQUER  ACCOUNT  for  SUPPLY 

SERVICES 

SUPPLY  SERVICES 

Year  19. . . 

Treasury,  Whitehall, 
19... 

GENTLEMEN, 

Under  the  authority  of  the  Exchequer  and  Audit  Departments  Act, 
1866  (29  &  30  Viet.  c.  39,  s.  15),  and  of  the  Credit  granted  to  the  Lords  Com- 
missioners of  His  Majesty's  Treasury,  by  the  Comptroller  and  Auditor 

General,  on  the  Account  of  His  Majesty's  Exchequer  at  the  Bank  of , 

under  the  provisions  of  the  said  Act:   I  am  commanded  by  the  Lords  Com- 
missioners of  His  Majesty's  Treasury  to  request  that  you  will  transfer  the 

following  sums,  on  the instant,  from  the  said  Account  to  the 

"Supply  Account"  of  [His  Majesty's  Paymaster  General1]  in  your  books, 
on  account  of  the  Supply  Services  under-mentioned: — 


Supply  Services. 

Amount. 

• 

£     s.      d. 

[or  of  such  other  Principal  Accountants  as  the  case  may  require.] 

354 


APPENDIX  IV 

I  am  to  request  that  when  these  sums  shall  have  been  transferred  accord- 
ingly, you  will  transmit  this  authority  to  the  Comptroller  and  Auditor 
General. 

I  am,  &c. 

To  be  signed  by  one  of  the} 
Secretaries  of  the  Treasury.  / 

To  the  Governor  and  Company  of  thel 
Bank  of.. 


INDEX 


Accounting  officers,  review  acts 
of  Paymaster  General,  150;  de- 
partmental, are  not  paymasters, 
156;  one  for  each  vote,  156; 
dignity  of  office,  158;  financial 
control  exercised  by,  159; 
Treasury  Minute  on  duties  of, 
160;  responsibility  to  Treasury, 
161;  personal  liability  of,  162; 
not  bonded,  163 

Adams,  H.  C,  "Science  of 
Finance,"  26n 

Appropriation  Accounts,  sum- 
mary for  civil  services  and  rev- 
enue departments,  248-252 

Appropriation  acts,  must  be  ini- 
tiated by  or  have  approval  of 
Crown,  38;  prepared  only  after 
discussion  and  decision  on  au- 
thorization of  expenditures, 
125;  English  and  American 
practice,  125;  two  general  bills 
prepared  and  enacted,  128 

Appropriation  heads,  facts  of  im- 
portance, 8 1 ;  subheads,  82-90 

Appropriations,  forms  of  acts 
of,  18;  itemization  of,  27-28; 
historical  development  of,  28- 
30;  powers  of  Parliament 
over,  37-39;  distinction  be- 
tween permanent  and  annual, 
40-41 ;  for  Consolidated  Fund 
Services,  42-43 ;  continuing 
criticism  of,  43-45;  made  only 
in  pursuance  of  formal  esti- 
mates, 47-48;  heads  under 
which  made,  74-81 ;  significance 
of  transfers  permitted,  82-83; 
subheads  classified  by  objects, 


87;  subheads,  illustration  of, 
88-90;  supporting  details,  90- 
92;  American  system  of  reim- 
bursable, 112;  control  over  by 
House  of  Commons,  129;  by 
"Votes,"  129;  expenditures  of, 
not  mandatory,  165 
Appropriations  in  aid,  35;  theory 
of,  100-103;  a  "token,"  101-102; 
arguments  for,  103-106;  first 
applied  to  Army  and  Navy, 
104;  gradually  adopted  for  civil 
services,  105;  policy  of,  fre- 
quently reviewed  and  con- 
firmed, 105;  Treasury  Minute 
on,  106;  not  consistent  with 
budgetary  principles,  107;  does 
not  promote  efficiency,  108; 
fundamental  objection  to,  108- 
109;  departures  from,  109;  Mr. 
Cox's  criticism  of,  uo-iii; 
contrast  with  American  system 
of  reimbursable  appropriations, 

112 

Army,  estimates,  character  and 
number  of  votes,  74-75 

Bank  of  England,  custodian  of 
funds,  37 

Bank  of  Ireland,  custodian  of 
funds,  37 

Bowles,  Thomas  Gibson,  origin 
of  Exchequer,  36-37;  attack  on 
system  of  transfers,  83-84; 
Criticism  of  system  of  appro- 
priations in  aid,  11411;  func- 
tions of  Standing  Committee 
on  Public  Accounts,  228 

Budget,   revenue   as   part-  of,   2; 


357 


INDEX 


collection  and  records,  2 ;  stand- 
ards, 2-8;  audit  and  reports,  3; 
custody,  3;  expenditures,  3; 
preparation  of  estimates,  3-4; 
nature  of,  5-8;  definition,  7-8; 
Economy  and  Efficiency  Com- 
mission recommendations,  8- 
10 ;  problem  of  control,  10-23; 
preparation  of  estimates,  13-14; 
review  of  estimates,  14;  hear- 
ings, 15;  procedure,  16-17; 
itemization,  extent  of,  18;  ad- 
ministrative control  through 
Finance  Department,  19;  dif- 
ference between  English  and 
American  systems,  19-20;  esti- 
mates only  part  of,  72;  mean- 
ing of,  255-256;  summary  state- 
ment by  Chancellor  of  Excheq- 
uer, 256-264;  budget  speech, 
265 ;  deals  primarily  with  rev- 
enues as  variable  factor,  266- 
267;  consolidation  of  proposals, 
268;  principles  applicable  to 
American  financial  administra- 
tion, 269-270;  principles  applied 
in  British  system,  271-275; 
contrast  of  English  and  Ameri- 
can practice  in  financial  admin- 
istration, 276-280 
Bureau  of  Municipal  Research, 
reports  on  budget  procedure, 
270-272 

Chalmers,  Sir  Robert,  testimony 
on  Treasury  control  over  de- 
partmental estimates,  62 ;  duties 
of  permanent  Secretary  of 
Treasury,  173-174;  duties  of 
estimate  clerks,  174 

Civil  list,  evolution  of,  31-33; 
definition  of,  34n 

Civil  services,  73-74;  estimates, 
character  and  number  of  votes, 
76-81 

Cleveland,  Frederick  A.,  Editor's 


note,  v-vii;  contributions  to 
budget  discussion,  270-272 

Commission  on  Economy  and 
Efficiency,  President  Taft's, 
work  of,  270-272 

Comptroller  and  Auditor  General, 
functions  of,  144-145 ;  status  of, 
216-218;  no  power  of  disallow- 
ance, 222;  no  interference  with 
executive  responsibility,  222- 
223 ;  duty  to  secure  economy, 
224-226;  relation  to  Standing 
Committee  on  Public  Accounts, 
229 

Comptroller  of  United  States 
Treasury,  power  to  prescribe 
manner  of  keeping  and  render- 
ing accounts,  20 

Consolidated  Fund,  importance 
of,  34-35;  (No.  i)  Bill  (1912), 
text  of,  314-315;  (Appropria- 
tion) Act  (1912),  text  of,  316- 

347 

Consolidated  Fund  Services,  char- 
acteristics of,  41 ;  items  of,  42 

Construction  of  public  buildings, 
progress  reports  on,  55 

Cox,  Harold,  criticism  of  continu- 
ing appropriations,  43-45;  ob- 
jections to  system  of  appropria- 
tions in  aid,  iio-m 

"Credits"  to  Treasury,  146 

Economy  and  Efficiency,  recom- 
mendations of  Taft  Commis- 
sion on,  8-10 

Estimate  clerks,  duties  of,  174 
Estimates,  recommendations  of 
Taft  Commission  on,  9 ;  prep- 
aration of,  13-14;  legislative 
review,  14;  central  executive 
review,  14;  review  by  depart- 
ment heads,  14;  distinguished 
from  appropriations,  14;  orig- 
inate with  executive,  47-48;  act 
of  Ministry,  48;  Treasury 


358 


INDEX 


agent  of  Ministry  in  prepara- 
tion and  submission  of,  49;  re- 
viewed   by    Treasury,    49-50 ; 
Army  and  Navy,  procedure  for, 
50-51 ;  forms  of,  prescribed  by 
Treasury,  51 ;  preparation  and 
submission,   52 ;   Treasury   cir- 
cular, 52-59;  regulations  to  be 
observed  in  preparation,  52-59; 
date  of  rendering,  53 ;  explana- 
tion of,  54;  form  of,  explana- 
tion of  increases  and  decreases, 
59-60;    Treasury    control,    61 ; 
summation   of  prior   decisions, 
62;  supplementary  data,  62-63; 
personnel,  list  of,  included  in, 
63;  incidental  expenses,  details 
of,  63;   comparative  data  pre- 
pared by  Treasury,  63-64;  data 
filled    in    by    department,    64; 
preparation  of,  within  depart- 
ments, 65-67;  responsibility  for 
departmental  review  placed  on 
permanent    accounting    officer, 
66-67 »    Treasury    examination 
of,   67-69;   transmission  of,  to 
House     of     Commons,     69-70; 
supplementary,    70 ;    character 
and  form,  73-99;  classification 
°f>   73-74  >   general   summaries, 
how  assembled,  93-100;  details, 
how  presented,  93 ;  explanatory 
memorandum,  94;  abstracts  of, 
95;   comparison  with  expendi- 
tures, 95 ;  criticism  of  character 
and  form,  99 ;  procedure  in  Par- 
liament, 115-143;   Select  Com- 
mittee    on     (1912),     134-140; 
recommendations      of      Select 
Committee    on    National    Ex- 
penditure   (1902),    135;    com- 
ments   of    E.    Hilton    Young, 
142 ;  approval  of,  does  not  sanc- 
tion expenditure,  167 
Excess  votes,  Civil  Contingency 
Fund,     128;     investigation    by 


Public     Accounts     Committee, 
128 

Exchequer,  origin  of,  36-37;  is- 
sue of  money  to  principal  ac- 
countants, 147 

Exchequer  and  Audit  Depart- 
ments Act  (1866),  146;  text 
of,  283-307;  Treasury  Minute 
on  (1867),  307-313 

Executive,  lack  of  responsibility 
in  U.  S.,  20;  responsibility  for 
expenditure  of  money,  38;  for 
organization  and  personnel,  169 

Expenditures,  control  over,  by 
Treasury,  20-22;  control  over, 
by  department  heads,  20-21 ; 
made  only  in  pursuance  of  ap- 
propriations by  Parliament,  26- 
28 ;  Parliamentary  control  over, 
27;  limitation  of,  under  Charles 
II,  29-30;  for  royal  household, 
32-33;  comparison  of,  in  esti- 
mates, 62-63;  report  of  Select 
Committee  on  National  Expen- 
diture, quoted,  65-69;  classified 
by  services,  73;  statement  for 
series  of  years,  98;  distinction 
between  authorization  and  ap- 
propriation of  funds,  124;  pro- 
cedure with  respect  to  author- 
ization, 124;  Select  Committee 
on  National  Expenditure,  es- 
tablished (1902),  134-135;  ap- 
propriations not  mandatory, 
165;  Treasury  must  authorize, 
166;  comparative  summary  of, 
252-254 

"Finance  accounts,"  two  reports 
to  Parliament,  235;  annual  re- 
port since  1802,  236;  two  basic 
tables,  promptly  rendered,  sum- 
marize financial  transactions, 
237 ;  summary  of,  238-241 ;  cash 
assets  only  listed,  242;  debt 
statement,  243 ;  do  not  summar- 


359 


INDEX 


ize  operations  for  series  of 
years,  246;  appropriation  ac- 
counts, analysis  in  summary, 
247;  no  report  of  audited  re- 
ceipts and  expenditures,  253- 

254 

Financial  Secretary,  staff  of,  173 
Financial    system,    contrast   with 

American  practice,  39-40 
Fiscal  year,   United   States,   24; 

England,  24 

Goodnow,  Frank  J.,  Foreword, 
ix ;  financial  administration, 
27m 

Hamilton,  Sir  Edward,  power  of 
transfer  between  appropriations 
desirable,  86;  defense  of  ap- 
propriations in  aid,  114^ 

Higgs,  Henry,  "The  Financial 
System  of  the  United  King- 
dom," 34;  financial  control  of 
House  of  Commons,  131 ;  forms 
used  by  Treasury,  148*1 

Home  Office,  subheads  of  appro- 
priation, 88-90;  supporting  de- 
tails, 90-92 

House  of  Commons,  exclusive 
financial  power  of,  115;  Parlia- 
ment Act  of  1911,  116;  stand- 
ing orders  on  financial  business, 
119-124;  control  exercised  over 
appropriations,  129;  control 
limited  to  review,  criticism, 
approval  or  disapproval,  130; 
facilities  for  discussion  and 
criticism  of  finances,  131 

House  of  Lords,  divested  of  pow- 
ers over  money  bills,  116 

Itemization  of  appropriations,  ex- 
tent of,  27-28 


Lowell,  A.   Lawrence,   Introduc- 
tion, xi-xii ;  financial  discussion 


in  House  of  Commons,  131- 
132;  evolution  of  Treasury, 
172;  Financial  Secretary,  staff 
of,  173;  English  financial  ad- 
ministration, 27IW 

Maitland,  F.  W.,  sources  of  pub- 
lic income,  28;  tax  levies,  29; 
grants  to  crown,  30 

National    Debt,    statement,    243. 

See  "Finance  Accounts" 
Navy,    estimates,    character    and 

number  of  votes,  75-76 

Office  of  Works  and  Public  Build- 
ings, furnishes  supplies  for 
offices  and  buildings,  194;  evo- 
lution of  supply  work,  194-195; 
powers  to  control  expenditures, 
196.  See  Public  Works 

Parliament,  origin  of  control  over 
expenditures,  28-30 ;  powers 
over  appropriations,  37-38 

Paymaster  General,  chief,  pays 
all  obligations,  149;  centralized 
office,  150 

Personnel,   list   of,   in   estimates, 

63 

Public  accounts,  theory  of,  24-26; 
accrual  basis,  25-26;  advan- 
tages and  disadvantages  of 
cash  basis,  25-26;  audit  of, 
209;  early  methods  of  audit, 
210;  development  of  present 
system  of  control,  21 1 

Public  Accounts  Committee,  ex- 
tra receipts  report,  103-104; 
House  of  Commons  establishes 
by  standing  order  (1866),  216; 
Exchequer  and  Audit  Depart- 
ments Act  (1866),  216;  meth- 
ods of  keeping  and  rendering 
accounts  prescribed  by  Treas- 
ury, 218;  procedure  audit  of, 


360 


INDEX 


219;  reports  of,  rendered  to 
Comptroller  and  Auditor  Gen- 
eral, 220-221 ;  audit  continuous, 
221 ;  instrument  of  control  in 
hands  of  Opposition,  228; 
Comptroller  and  Auditor  Gen- 
eral, staff  agent  of,  229;  re- 
views Treasury  administration, 
230;  value  of,  231;  reports 
findings  to  Treasury,  232;  re- 
lies on  publicity,  233;  does  not 
interfere  with  responsibility  of 
Treasury,  234.  See  "Finance 
Accounts" 

Public  documents,  printing  and 
distribution  of,  207 

Public  funds,  custody  of,  23 

Public  Moneys,  Committee  on 
(1856-57),  report  on  consolida- 
tion of  Paymaster  offices,  150- 
151 ;  recommendations  on  finan- 
cial control,  213-215 

Public  works,  distinction  between 
construction  of,  for  public  use 
and  for  government,  183-184; 
executive  responsibility  for, 
avoids  "pork  barrel"  methods, 
185;  centralized  control,  186; 
functions  of  Office  of  Works 
and  Public  Buildings,  186-187; 
voting  funds  for,  188;  long- 
term  plans  for,  189;  policy  of 
contracts,  191;  rentals  and  re- 
pairs of  buildings,  192.  See 
Office  of  Works  and  Public 
Buildings 

Revenue  services,  73-74 

Stationery  Office,  stationery  and 
printing,  supply  service,  198; 
estimates  for  all  departments, 
199;  estimates  with  supporting 
details,  199-201;  allotment  of 
appropriations  by,  202;  Treas- 
ury Minutes  (1912)  on  expen- 


diture for,  202-203;  procedure 
in  purchase  and  issue  of  sup- 
plies, 204-206;  control  of  ex- 
penditures, 208 

Stourm,  Rene,  "Le  Budget,"  26n 
Supply   Services,   41-42;   charac- 
teristics of,  41-45 

Taft,  William  H.,  President's 
Commission  on  Economy  and 
Efficiency,  270 ;  American  finan- 
cial methods,  27 in 

Transfers  of  appropriations,  rea- 
sons for,  82-83;  defects  in  pro- 
cedure, 84;  procedure  and  ad- 
vantages of,  85-86;  safeguards 
against  abuses,  86 

Treasury,  submits  estimates,  49- 
50;  estimates  circular,  52-59; 
control  over  estimates  exer- 
cised before  submission,  61 ; 
power  to  review  any  item  of 
expenditure,  64-65 ;  Estimate 
Clerk,  duties  of,  67-69;  exam- 
ination of  estimates,  67-69; 
review  of  estimates  by  Finan- 
cial Secretary,  69 ;  credits,  146 ; 
funds,  146;  sanctions  expendi- 
tures, 167;  independent  control 
of,  over  expending  depart- 
ments, 168;  exercises  control 
as  agent  of  chief  executive, 
169;  control  over  salaries,  170; 
control  over  expenditures  for 
supplies,  171 ;  organization  of, 
for  financial  control,  171-172; 
Chancellor  of  Exchequer  re- 
sponsible head,  172;  permanent 
Secretary  of,  173-174;  commit- 
tees of  investigation,  175-177; 
as  organ  of  administrative  con- 
trol, 178;  continuous  supervi- 
sion of,  179;  not  a  public  serv- 
ice department,  180;  responsi- 
ble for  general  efficiency  of 
governmental  business,  181- 


361 


INDEX 


182;  prescribes  methods  of 
keeping  and  rendering  public 
accounts,  218;  forms,  authoriz- 
ing and  granting  credits  and 
Exchequer  issues,  348-355 
Treasury  System,  official  descrip- 
tion of,  by  Chancellor  of  Ex- 
chequer (1885),  152-155 

United  States,  lack  of  central 
executive  control,  20 

Virement,  power  of,  82 

"Votes,"  distinguished  from  sub- 
heads, 82;  character  and  num- 
ber of,  74-81 ;  subheads,  illus- 
tration of,  88-90;  subheads, 
supporting  details  of,  90-92 


Votes  of  credit,  to  meet  emergen- 
cies, 128 

Votes  on  Account,  55;  embodied 
in  Consolidated  Fund  (No.  i) 
Act,  126;  restricted  to  services 
authorized,  126 

Welby,  Lord,  memorandum  on 
audit,  211-213;  memorandum 
on  financial  accounts,  236 

Willoughby,  W.  F.,  budget  con- 
trol, 2  in 

Young,  E.  Hilton,  System  of  Na- 
tional Finance,  viin;  views  on 
Select  Committee  on  Esti- 
mates, 142-143 


(I) 


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